SINGAPORE (THE BUSINESS TIMES) - The board of Kitchen Culture Holdings lodged a report on Friday (July 30)with the Commercial Affairs Department (CAD) in relation to "suspected payroll irregularities" concerning two former employees. The sum involved amounted to about $520,000.
The two staff, who were not named, worked at the company's wholly owned subsidiary, KHL Marketing Asia-Pacific. The company has handed over the relevant documents to CAD to assist in its investigations, it said in a filing on Saturday.
Meanwhile, the board revealed on Sunday that independent director Yap Sze Hon, a member of its nominating committee, disagreed with the board's decision to fire former chief executive Lim Wee Li.
The group, which is in the business of supplying kitchen equipment, had earlier dismissed Mr Lim over "grave misconduct" affecting the company's business. This, it said, was due to findings in an interim report from Baker Tilly Consultancy, which had raised questions over potential breaches by officers and employees of the company. Certain failures of Mr Lim were also identified.
Following his termination, Singapore Exchange (SGX) had on July 14 issued a notice of compliance, directing Baker Tilly to "expand its scope" of the internal review. The review was initiated to analyse the circumstances that led to breaches of Catalist rules, as well as identify internal control weaknesses and determine who are the parties responsible.
In its response to SGX's notice of compliance on Sunday, the Kitchen Culture board listed several potential breaches and irregularities Mr Lim allegedly exposed the company to, which brought on "unnecessary risks and consequences".
For instance, he gave a $1.2 million loan to a third party without written board approval and business justification. There was also a $700,000 cash transfer to Mr Lim with no documented board approval and supporting justification.
Additionally, while loan repayments made by Mr Lim to private lenders on behalf of the company were not documented, the company subsequently recorded these repayments of $200,000, $250,000 and $304,771 as due to Mr Lim instead of the private lenders. This creates a risk of misuse of company's funds, said the board.
Lastly, three vehicles, which cost $1.1 million in total, were bought without board approval and business justification.
Kitchen Culture said that Mr Lim had caused the company to "breach certain Catalist rules".
He had "expressly authorised the release of an inaccurate announcement", while failing to implement and monitor the company's internal accounting controls system. He also did not ensure that transactions were properly authorised and recorded, the report noted.
"Mr Lim's conduct has a serious impact on the company's reputation and contributed to significant material weaknesses in the company's internal controls," said Kitchen Culture.
However, independent director Mr Yap disagreed with the nominating committee's decision to fire Mr Lim.
In an accompanying statement to the filing, he said that the relationship between Mr Lim and the controlling shareholders from big data firm Ooway "fell apart" when the latter came to Singapore in June this year. Thereafter, on July 1, they asked for his resignation within three days through an e-mail.
Kitchen Culture last September said it would take a 30 per cent stake in Ooway Technology for $23.92 million - which would be funded by issuing 90 million new shares at 26.58 cents apiece.
Mr Yap added: "Given the underlying tension... care has to be exercised to ensure fairness with due regard for the larger interest of the company and all shareholders."
Next, Mr Yap claimed that the board dismissed Mr Lim on July 7 without first waiting for the response to the interim report from Mr Lim's lawyers. They also did not convene a disciplinary hearing, he said.
He then pointed out that in meetings with Kitchen Culture's internal auditors and lawyers, it was "ascertained that there was no evidence of fraud, dishonesty or attempt to conceal information". Mr Yap then stated that the lapses flagged out were "mostly technical in nature". They were also known to certain directors, and not likely to be repeated.
"It is premature and unjust to lob the blame of systemic weaknesses squarely onto certain individuals."
Mr Yap also mentioned that Mr Lim was someone who "focused more on the fund raising and the business side of the company, rather than paper work and procedural formalities".
"The lapses occurred not only in a pandemic year, but also amid turbulent changes in the board leadership, and in a frenetic period when $19 million was raised and the finance department was constantly fire fighting," he said, adding that Mr Lim, as the founder, had put in millions of dollars into Kitchen Culture when it was in financial trouble.
Shares of Catalist-listed Kitchen Culture last traded at eight cents on July 7.