CHINA Essence Group announced that a preliminary company search on the group's subsidiaries in China by a UK consultant has discovered "unauthorised transactions" in at least two subsidiaries by its former executive chairman and chief executive.
In an announcement to the Singapore Exchange, mainboard-listed China Essence said it was notified by Moore Stephens on Sept 4 that the shareholding of at least two of its subsidiaries had been changed to certain individuals in April 2015.
The company said its new directors who were appointed to the board in August have no prior knowledge of the transactions and its non-executive independent chairman Er Kwong Wah who was also from the former board confirmed that the transactions were neither authorised nor submitted to the previous board for approval.
The transactions were also not reported in the firm's first quarter results for the 2015 financial year.
China Essence added that Zhao Libin, the firm's former executive chairman and CEO, admitted that he did the transactions and had not disclosed the matter to the board.
According to the firm, Mr Zhao has informed its chief financial officer (CFO) Yap Kong Wai that the shareholding change arose from "long-standing debts" owed to the farmers by the subsidiaries which had led the farmers to "almost run riot at the factory".
"The local government had to step in to quench the riot by settling the debts on behalf of the subsidiaries. In return, the two subsidiaries had to transfer the shares to the local government as held in trust," said China Essence, referring to Mr Zhao's communication with the firm's CFO.
It said the board will take proper actions on the matter after seeking advice from the authorities and legal adviser.
The counter was unchanged at 1.4 Singapore cents as at 9.43 am on Monday.