THE Singapore Exchange Regulation (SGX RegCo) is looking into potential listing-rule breaches by Kitchen Culture : 5TI 0%and will refer any infringements of the law to the relevant authorities.

This comes after an independent review of the embattled kitchen solutions provider flagged potential payroll irregularities, as well as uncovered unauthorised transactions by the company.

Deloitte was appointed to conduct the independent review in 2021 after SGX RegCo directed Kitchen Culture to appoint an independent special auditor to investigate the company’s use of fundraising proceeds, potential internal control lapses, suspected payroll irregularities and purported unauthorised transactions.

At the time, the company’s continuing sponsor, SAC Capital Private Limited, had received information which suggested there could potentially be concerns about unauthorised transactions within the company.

Such transactions may not be in the company’s ordinary course of business and may not be supported by proper agreements.

Kitchen Culture’s board had also lodged a police report in 2021 with the Commercial Affairs Department in relation to suspected payroll irregularities concerning two former employees involving a sum of around S$520,000.

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On the potential payroll irregularities, Deloitte said in its report on Friday (Jul 21) that it was unable to independently verify whether the two former employees were meaningfully employed by Kitchen Culture during their period of employment.

Based on the evidence reviewed by Deloitte, it appeared that Kitchen Culture’s executive director and former chief executive Lim Wee Li had hired the two individuals for the purpose of securing employment passes in exchange for monetary benefits.

If found to be true, these actions would constitute as offences under the Employment of Foreign Manpower Act, said Deloitte.

Deloitte noted in its report that the employment and determination of compensation for the two employees “appear to lack justification”.

For instance, the monthly basic salary range and roles offered to the pair “do not appear commensurate with their years of relevant working experience when compared with other key management personnel under the group”. The duo’s monthly salaries also exceeded the internal benchmarks set for managerial roles within the company.

Deloitte also found that the hiring and termination processes for the two former employees departed from Kitchen Culture’s policy and practice.

The company’s human resources (HR) department had “failed to ensure conformity with company standards, criteria and practices required for the hiring process as stipulated in the HR manual”. Instead, the pair were hired under the instructions of Lim.

As for the unauthorised transaction, Deloitte uncovered a total of five agreements that Kitchen Culture’s former executive director Lincoln Teo Choon Han had executed on behalf of the company’s wholly-owned subsidiary KC Technologies without obtaining approval from the board.

Under the agreements, KC Technologies and Sino Allied HK Limited were jointly set up with a structured finance scheme for one year to support Amazon’s e-commerce merchants with their collective procurements.

KC Technologies was to fund 80 per cent, or US$480,000, of the total investment amount of US$600,000, and Sino Allied was to fund the remaining 20 per cent.

These financing moves are not in the group’s ordinary course of business, said Deloitte. The company has since terminated the financing business and recovered monies extended in relation to the unauthorised transaction and its corresponding interest pursuant to the agreements.

In relation to the above issues, Deloitte highlighted in its report potential listing-rule breaches relating to internal control lapses involving the company’s hiring processes and new investment proposals, as well as potential violations of directors’ fiduciary duties under the Companies Act.

SGX RegCo said in a separate statement on Friday that the findings of the report “underscore the importance of establishing adequate and effective internal controls and risk management systems on a continuing basis”.

The regulator will follow up with Deloitte on the remaining phase of the special audit with a view to investigate the potential listing-rule breaches and refer the potential infringements to the relevant authorities.

Kitchen Culture said in a separate filing that it is in the process of reviewing the contents of the report to determine its next course of action.

Trading in the shares of Catalist-listed Kitchen Culture has been suspended since July 2021.