Thursday, March 08, 2012

NFC "Subsidiaries" Never Audited

Various parties including myself have made the allegation that the directors of National Feedlot Corporation (NFCorp) has improperly siphoned money originating from the Government’s RM250 million meant for the development of the cattle industry in Malaysia.  The money, at least RM81 million as at 2009, has been transferred to various companies owned by the directors of NFCorp, as revealed in the 2009 NFCorp audited accounts.  This amount will definitely have exceeded RM100 million as of today.

The directors of NFCorp have admitted that the money has indeed been transferred to companies which they own and are not related to NFCorp.  However, they argued that these “so-called ‘unrelated companies’ of NFCorp where the fund was channeled to, were always meant to be the subsidiaries of NFCorp.”

The Chairman of NFCorp Datuk Seri Mohamad Salleh had in earlier statements claimed that it was always their intention to “rationalise the structure of NFCorp to bring in all associated companies and assets within the hold of NFCorp”.

The key “unrelated companies” held by the directors operating in Malaysia are National Meat and Livestock Company Sdn Bhd (formerly known as BizVance Sdn Bhd) (NMLC), Real Food Company Sdn Bhd (formerly known as Macronial Technology Sdn Bhd) (RFC) and Meatworks Corporation Sdn Bhd.

The family members of Datuk Seri Shahrizat Jalil, Minister of Women and Family Affairs sit as directors in all these companies.  They are her husband Datuk Seri Mohamad Salleh and their children, Wan Shahinur Izmir, Wan Shahinur Izran and Wan Izzana Fatimah Zabedah.  The shareholders of these companies are also various permutations the same family members and companies which they own.

If the argument made by the NFCorp directors that these companies were indeed “always meant to be subsidiaries of NFCorp”, then surely, one would expect the financial accounts of these companies to be properly managed to ensure accountability and transparency over the use of the tax-payers’ RM250 million loan.

However, a simple check with the Registrar of Companies shows that none of these companies were ever audited ever since they became operational!  Both NMLC and RFC for example, has never been audited since four and a half years ago on 30 June 2007 when it was still a dormant company with no revenue or assets.  Meatworks on the other hand, has never filed its accounts since it was set up on 17 September 2009.

Hence not only was the siphoning of funds to these companies owned by the directors of NFCorp a breach of trust, the directors were further negligent, intentionally or otherwise, in accounting for the use of the monies.  The directors of NFCorp must answer as to why NMLC and RFC have never filed their accounts or even presented to the Ministry of Finance and Ministry of Agriculture as part of NFCorp’s loan agreement to provide updates on the use of the funds.

What is worse is the fact that the directors of these “unrelated companies” have further run afoul of the Companies Act 1965 by failing to hold the company’s Annual General Meetings, file its Annual Returns to the Registrar of Companies together with their Audited Financial Report.

For example, Clause 169(1) of the Companies Act says that “the directors of every company shall, at some date not later than eighteen months after the incorporation of the company and subsequently once at least in every calendar year at intervals of not more than fifteen months, lay before the company at its annual general meeting a profit and loss account for the period since the preceding account (or in the case of the first account, since the incorporation of the company) made up to a date not more than six months before the date of the meeting.

Under Clause 171(1), the Act dictates imprisonment for 5 years or RM30,000 “if any director of a company fails to comply or to take all reasonable steps to secure compliance by the company with the foregoing provisions of this Division or has by his own wilful act been the cause of any default by the company thereunder, he shall be guilty of an offence against this Act.”

The concern for all Malaysians today over the above scandal is that the Directors may take steps to paper over the scandal with backdated accounts which will then hide certain activities carried out by by RFC and NMLC with tax-payers’ money.

We would like to remind the auditors of these companies to be extra diligent and mindful in auditing the accounts as public interest is involved.  Under the Companies Act, it is the duty of an auditor of a company to form an opinion as to “whether he has obtained all the information and explanations that he required” and “whether proper accounting and other records (including registers) have been kept by the company”.

The Act further clarifies that if an auditor finds “a breach or non-observance of any of the provisions of this Act” and if such a breach is serious enough, “he shall forthwith report the matter in writing to the Registrar.”  The penalty for not fulfilling the duties of an appointed auditor is “imprisonment for two years or thirty thousand ringgit or both”.

The Auditor is also protected under the law in Clause 174A that “in the absence of malice on his part, [shall not] be liable to any action for defamation at the suit of any person in respect of any statement which he makes in the course of his duties as auditor”.

Regardless of the above, we call upon the Registrar of Companies to act against the directors of these companies which have flouted the law by using the powers vested in him – to initiate investigations and “to inspect any accounts, book or other document seized.”  The interest of Malaysians is paramount, and we call on all authorities to act without fear or favour to ensure that our rights are fully protected from those who abuse their powers.
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