China Sky faulted for rule violations in scathing report

China Sky faulted for rule violations in scathing report

CHINA Sky Chemical Fibre failed to make mandatory disclosures, included wrong information in share market announcements and undertook a major transaction without investor approval, according to a damning report yesterday.

Special auditors Stone Forest Corporate Advisory, which began its probe in October, said the incidents happened between 2006 and 2011.

The problems at the firm led to its shares being suspended in November 2011. The suspension remains in place.

Stone Forest said one of the failures occurred in December 2006 when an acquisition of a unit by China Sky in turn made Fujian Fuyuan one of its subsidiaries. No disclosure was made via Singapore Exchange (SGX) announcements or in China Sky's annual reports although listing rules required such disclosure, Stone Forest added.

After the purchase, two construction agreements totalling 114 million yuan - in 2008 and in 2009 - were struck to develop some land in Fujian, which was held by Fujian Fuyuan.

Stone Forest said the agreements should have been tabled to China Sky's board to decide whether a disclosure was necessary. It was not until March 2011 that the contract sum was announced, only after SGX queries.

In June 2011, a "termination agreement" was signed transferring China Sky's stake in Fujian Fuyuan back to the original seller.

Stone Forest noted that the board did not give approval for the deal.

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