Over the number of years Seasons Ltd., fully owned by Calmitech Corportation Ltd., a listed entity, of which you are now the company secretary, has adopted aggressive growth strategy via targeted acquisition together wit

CS Professional · Ethics, Governance and Sustainability · PYQS · June 2017
Over the number of years Seasons Ltd., fully owned by Calmitech Corportation Ltd., a listed entity, of which you are now the company secretary, has adopted aggressive growth strategy via targeted acquisition together with organic growth plan. Therefore, the disclosure requirements are based upon the listing rules. Recently Seasons acquired Hijobs Ltd., for geographic exposure, revenues and profits. During the negotiation process there were issues regarding management structure, values and due diligence. Post completion the process of acquisition the problems started to emerge like lack of data provided in due diligence, reflected the fact that it either didn't exist or was incomplete. Now it was time for preparation of the year end accounts. There were issues regarding incomplete accounting records and incorrect exchange rates. In short preparation of the Annual report and the financial statements was a significant challenge. You investigated relatively limited available information on the branch and tentatively concluded that is not material. What would you do knowing that disclosure of such information to the auditors and the Board may delay the parent company's result announcement to the market?

Answer & Explanation:

The basic principle of Corporate Governance is to maintain the ethical standards, adequate disclosures, transparency and work in the interest of all the stakeholders. Being a Company Secretary of the company, I would act in the best interest of the company and disclose the findings immediately to the Board of directors, Board of the parent company and the auditors. In addition, I would look for a code of conduct which provides guidance on such matters. Proper qualitative and quantitative assessment on materiality of the new facts can be initiated in the best interest of the company. A team may be formed to expedite correcting the entries and making correct disclosures. Although, the process may defer the declaration of results in the market, but it is better than declaring the wrong results and then provide significant additional disclosures at a later date. This delay for the broader interest is inevitable.

Topics: Corporate Governance

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