SGX RegCo orders Kitchen Culture to expand scope of internal control review

SINGAPORE Exchange Regulation (SGX RegCo) issued a notice of compliance to Kitchen Culture during the Wednesday midday trading break, asking the company's audit and risk committee (ARC) to commission additional inquiries. SGX RegCo also asked the nominating committee to disclose more details about the recent termination of Kitchen Culture's chief executive.

The regulator has directed the ARC to commission Baker Tilly Consultancy (Singapore) to expand its scope of work.

Baker Tilly had earlier been appointed to undertake an internal control review of Kitchen Culture, a home interiors supplier, particularly in the area of cash management. SGX RegCo now wants Baker Tilly to also look into "circumstances that led to breaches and/or potential breaches of Catalist rules" as well as internal control weaknesses uncovered by Baker Tilly's earlier investigations and listed in the consultancy's interim report. The parties responsible for these breaches are also to be identified.

During the course of its work, Baker Tilly must report concurrently to Kitchen Culture's ARC, SGX RegCo, and the company's continuing sponsor SAC Capital.

Kitchen Culture's board had on July 7 dismissed CEO Lim Wee Li, citing "gross default or grave misconduct" in connection with or affecting the company's business.

Also on Wednesday, Kitchen Culture's board released a statement saying that Mr Lim's termination was not based on an earlier whistleblowing report - as had been alleged by Mr Lim - but was solely based on the findings of Baker Tilly's interim report.

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Among other things, the interim report said Kitchen Culture's use of proceeds was not reported with the timeliness required under Catalist rules. Furthermore, a February announcement had contained inaccuracies pertaining to the amounts used and the periods in which they were used.

Mr Lim has called his dismissal "unlawful" and contended that he was not given sufficient opportunities to respond to certain allegations against him.

But the board, in its Wednesday statement, said Baker Tilly had gone through its findings with Mr Lim. Any of his verbal comments that were supported by documents were added to the interim report, and Mr Lim was also invited to provide a written response to the findings.

It added that Mr Lim had also had time to provide further responses in the five weeks leading up to his dismissal.

"During these five weeks, Mr Lim requested Baker Tilly's engagement letter, and copies of the correspondence between Baker Tilly and the audit committee leading up to the issuance of the interim report. These were not provided as they have no bearing whatsoever on whether Mr Lim had failed in his duties as CEO," the board said.

Mr Lim had said in an emailed statement to The Business Times that he did not agree with the decision to terminate him.

"The allegations against me came on the back of an internal control review of the company. My lawyers have been asking the company for documents to allow me to understand the context leading up to the internal control review of the company. However, the company did not provide the requested documents," he said.

He also expressed disappointment that he was terminated on the same day that his written responses to their allegations were sent to the company's lawyers.

In its statement, the board said that it had considered Mr Lim's written responses and decided that his termination was justified.

"The company rejects Mr Lim's allegation that he was not afforded due inquiry, as he has had ample opportunity, and has responded to the matters raised in the interim report, and has also had access to all relevant documents," the board said.

Regarding the whistleblower report, the board said that it was sent by an employee who wished to remain anonymous to specific independent directors.

The whistleblower alleged wrongdoings in Kitchen Culture and suggested that it did not have adequate and effective internal controls. The company is still investigating these allegations.

The board said it has not taken any action against Mr Lim or any other person relating to matters raised in the report, and that the report will remain confidential under the company's whistleblower policy.

Shares of Kitchen Culture have been suspended since July 12, following a trading halt called on July 7.