This article first appeared in The Edge Malaysia Weekly on June 10, 2024 - June 16, 2024

THE past three years have not been easy for Serba Dinamik Holdings Bhd (KL:SERBADK) after audit discrepancies were revealed, culminating in the delisting of its shares last Wednesday following Bursa Malaysia’s rejection of its final appeal to remain on the bourse. The company was removed from the stock exchange on June 5.

In truth, the writing had been on the wall for the troubled oil and gas services provider for quite some time already. Indeed, nearly half of its seven-year period on the bourse was mired in controversy.

Prior to the trading suspension of its shares in January 2023, Serba Dinamik’s shares were traded at a mere two sen apiece, which valued the company at RM74.54 million.

At its peak, Serba Dinamik’s share price was at RM2.50 (adjusted post-bonus issue),  giving it a market capitalisation of RM6 billion in early 2023.

The party ended in late May 2021, as the external auditor KPMG flagged statutory audit issues. Its share price melted since then and has never recovered.

While KPMG exposed the audit issues, Serba Dinamik’s board took legal action against its external auditor. The company also sued Bursa Malaysia to challenge the exchange’s directives concerning the requirement to conduct a special independent review and to disclose the findings.

It then finished its financial year ended June 30, 2022 (FY2022) with a huge net loss of RM1.1 billion. It even incurred its largest quarterly net loss of nearly RM1 billion for 3QFY2023, mainly due to impairment of trade receivables amounting to RM865.1 million arising from projects that the company was unable to fulfil.

By January 2022, the group had been classified as a cash-strapped Practice Note 17 company after another external auditor, Nexia SSY PLT, expressed a disclaimer of opinion over the group’s audited financial statements for the 18-month financial period ended June 30, 2021.

This was followed by 11 straight quarters of red ink, with the latest quarterly results for the third quarter ended March 31, 2024 (3QFY2024) revealing a net loss of RM108.1 million against RM972.8 million a year ago, primarily due to lower administrative expenses.

At the same time, the group’s gross borrowings amounted to RM3.85 billion against cash and cash equivalent of only RM10 million.

Now a non-listed entity, the task of addressing its financial constraints has only got tougher — especially given its track record.

As with all corporate shenanigans where minority shareholders end up the biggest losers by far, what transpired at Serba Dinamik in the past three years serves as a good lesson on the importance of sound corporate governance and how independent directors should play a more effective role in ensuring that there is transparency in daily business operations.

On the other hand, many would point out that the way the regulators and authorities dealt with the Serba Dinamik saga would have inspired little confidence in the capital market.

Initially, Serba Dinamik’s executives — including its managing director and CEO Datuk Mohd Abdul Karim Abdullah — were brought to trial by the Securities Commission Malaysia (SC) on Dec 28, 2021 for submitting a false financial statement to Bursa after the regulator conducted an investigation into the audit issues raised by KPMG.

But subsequently, upon conclusion of the probe, the SC in April 2022 decided to compound only Serba Dinamik’s top brass, including Abdul Karim and three other top executives — executive director Datuk Syed Nazim Syed Faisal, group chief financial officer Azhan Azmi, and vice-president of accounts and finance Muhammad Hafiz Othman — a total of RM16 million for submitting false statements involving revenue of RM6.01 billion for FY2020, which was flagged by KPMG.

The SC’s actions came on the heels of the Attorney-General’s Chambers (AGC) decision to accept representation from Serba Dinamik and its executives seeking a lesser penalty. This led to the SC’s issuance of compounds to the accused parties, which were fully settled in May 2022.

Subsequently, Serba Dinamik and its four top executives were discharged and acquitted by the Sessions Court.

Then minister in the Prime Minister’s Department (Parliament and Law) Datuk Seri Dr Wan Junaidi Tuanku Jaafar explained the AGC’s decision to drop charges against Serba Dinamik and four of its executives was on the basis that punitive action could be taken immediately (rather than having the case dragged out indefinitely).

But is the same action accorded to all transgressors in all cases? Perhaps not everyone agreed with the actions taken in the Serba Dinamik case as it is noteworthy that in April 2022, SC chairman Datuk Syed Zaid Albar stepped down, just six months after his term was extended for a three-year period. His early exit followed the AGC’s controversial decision to withdraw criminal charges against Serba Dinamik and its four senior executives.

Soon after, SC managing director Foo Lee Mei, executive director and general counsel Chee Fei Meng, and executive director of digital strategy and innovation Chin Wei Min also resigned.

That the authorities chose to accord Serba Dinamik such leniency was all the more interesting, given that the company had taken legal action against Bursa Malaysia in November 2021, claiming that the regulator had acted in excess of its power in requiring the undertaking of a special independent review of the impugned transactions and the disclosure of the findings.

In February 2022, the High Court dismissed the case, prompting Serba Dinamik to file an appeal. It eventually withdrew its appeal at the end of 2022.

Late last year, Bursa reprimanded Serba Dinamik and 10 directors for violating market listing requirements, citing “serious dereliction of duties” resulting in corporate governance failures, particularly in ensuring proper and timely disclosure of material information and compliance with regulatory directives.

Victor Saw Seng Kee from PricewaterhouseCoopers Advisory Sdn Bhd has been Serba Dinamik’s liquidator since July 2023, after the court allowed a winding-up petition against Serba Dinamik and its three companies.

According to Bursa filings, Sarawakian businessman Abdul Karim held 14.52% of Serba Dinamik before the delisting of the stock. His block of shares was valued at RM10.77 million. 

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