A special audit report by Deloitte on Kitchen Culture found that the latter potentially breached Singapore Exchange’s (SGX) listing rules relating to internal control lapses involving its hiring processes.
The report covered the alleged payroll irregularities of some $520,000 paid to two former employees in the company’s subsidiary, KHL Marketing Asia-Pacific.
The report also touched on the alleged unauthorised fund transfer of US$480,010 to an overseas entity.
In August 2021, Kitchen Culture filed a suit against its former CEO Lim Wee Li and two individuals to recover the $520,000. This came after a July 31, 2021 announcement when Kitchen Culture lodged a report with the Commercial Affairs Department (CAD) over suspected payroll irregularities.
In Deloitte’s report, the auditor said that it was unable to independently verify whether the two employees in question were “meaningfully employed” by the company during their period of employment. It adds that based on circumstantial evidence, Lim had employed the two individuals to secure their employment passes in exchange for monetary benefits, which went against Sections 22 and 23 of the company’s Employment of Foreign Manpower Act.
The employees’ salaries also appeared to be unjustified and the way they were hired and subsequently terminated were not in line with the company’s policy and practice.
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With regard to the unauthorised fund transfer, which took place in June 2021, Deloitte found five agreements that Kitchen Culture’s former executive director, Lincoln Teo Choon Han, had executed on behalf of KC Technologies without obtaining approval from the board. KC Technologies is another one of Kitchen Culture’s subsidiaries.
Under the agreements, KC Technologies and Sino Allied (HK) were to set up a structured finance scheme for a year together to support Amazon’s e-commerce merchants with their collective procurements.
Of the total investment amount of US$600,000, KC Technologies was to find 80% or US$480,000 of the amount while Sino Allied was to fund the remaining 20% or US$120,000.
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According to the report, the investment was a departure from the company’s order of business. Kitchen Culture has since terminated the financing business and recovered a sum in relation to the unauthorised transaction.
“Arising from the above issues surrounding the payroll matter and unauthorised transaction, Deloitte highlighted potential listing rule breaches relating to internal control lapses involving the company’s hiring processes and new investment proposals, potential breaches of the Employment of Foreign Manpower Act and Ministry of Manpower guidelines, as well as potential contravention of directors’ fiduciary duties under Section 157 of the Companies Act,” says SGX RegCo in its July 21 statement.
“SGX RegCo will continue to follow up closely with Deloitte on the remaining phase of the special audit with a view to investigating into potential listing rule breaches and referring the potential contraventions of the laws to the relevant authorities,” it adds.
Shares in Kitchen Culture last traded at 8 cents before its trading suspension since July 2021.
