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Employee share scheme irregularity a one-off event: Ipco

A RECENT incident involving an irregularity with an employee share scheme flagged up by its auditors was a one-off event, Ipco International said on Thursday evening, adding that it is confident a solution can be reached in due course.

The board of the diversified holding company said on Aug 22 that two additional partners had been added to Xiaogan He Shun Investment Management Centre LLP - the implementation vehicle for the employee share scheme of a subsidiary, Hubei Zonglianhuan Energy Investment Management Inc (HZLH) - without the board's knowledge or approval.

The registered capital granted to the two partners represents an indirect 5 per cent interest in HZLH, one of the group's cash generating units which supplies natural gas to four cities in Hubei, China.

On Thursday evening, in response to further queries by the Securities Investors Association (Singapore), the board said that the auditors had been unable to obtain sufficient appropriate evidence regarding "the nature and veracity" of the transaction.

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"To this end the company has sought legal advice from a leading law firm in Shanghai and will provide appropriate updates," it said. "The management has no reason to believe that a viable solution in accordance with both PRC and Singapore regulations cannot be reached in due course."

The group added that systematic audits by its internal auditor in previous years have not identified any significant control or administrative efficiencies. Furthermore, the Singapore headquarters communicates regularly with HZLH and receives monthly management accounts.

But the directors will review and reinforce existing oversight and control procedures, given current circumstances, and will recommend new controls as required.

One of the proposed measures is to send staff more regularly to HZLH's site office to conduct more frequent meetings and to improve communications, Ipco said.

"Please note that, despite this recent episode, there were no other notable incidents that arose previously," said the firm. "Over the past many years HZLH has consistently performed quite well financially in terms of both revenue and profit growth."