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Frontken Corporation Berhad (651020-T)
ANNUAL REPORT
2016
29. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR
(i)
Following the resignation of a senior management personnel of Frontken Malaysia Sdn Bhd (“FM”), a wholly-
owned subsidiary of the Company, in 2012 the Board of Directors of the Company (the “Board”) was made aware
that there may be some irregular dealings between FM and its suppliers.
On 1 October 2012, Messrs Crowe Horwath was appointed to carry out a special investigative audit. Messrs
Crowe Horwath issued a report on 18 February 2013 followed by an Expanded and Revised Investigative Audit
Report on 3 June 2013.
The Company had on 11 June 2013 lodged a police report at the Police Headquarters, Commercial Crime
Investigation Department at Bukit Aman on the alleged financial irregularities.
A civil suit had also been lodged against an ex-senior management personnel and 5 others (“collectively known as
Defendants”) in the High Court of Penang for inter alia recovery of monies identified to have been wrongfully paid
out by FM to some of the Defendants in view of the findings of the Investigative Audit conducted by Messrs Crowe
Horwarth.
An ex-parte Mareva Injunction Order was subsequently obtained by FM against one of the Defendants on 2 August
2013. This was followed by an ex-parte Ad Interim order dated 16 August 2013. In essence, the purpose of the
ex-parte Orders was to freeze his assets. FM’s Mareva application against the one of the Defendant was allowed
by consent on 18 March 2014. The main civil suit has been fixed for case management on 21 July 2015. The trial
date fixed on 16 to 18 November 2015 have been taken off and new trial dates have been fixed on 18 to 20 April
2016.
In respect of the main civil suit, some of the Defendants filed Defences and Counterclaims against FM and some
of its existing senior management. The aforesaid counterclaims are being resisted by FM as well as its senior
management.
The Board has lodged a second police report on one of the Defendants for fraudulently and/or unlawfully altering
the email details in the Defendant affidavits for attempting to mislead the Court and pervert the course of justice.
On 18 April 2016, the Company and a defendant has recorded a consent judgement to resolve their respective
claims against each other pursuant to the defendant agreed to pay a sum of RM2,100,729 to the Company within
42 months from 1 June 2016 pursuant to prescribed payment terms as contained in the Consent Judgement as
final settlement of all claims that they have against each other.
30. SIGNIFICANT EVENT OCCURRING AFTER THE REPORTING PERIOD
The Companies Act 2016 came into effect on 31 January 2017 (except for Section 241 and Division 8 of Part III of the
said Act) and replaces the existing Companies Act 1965.
Amongst the key changes introduced under the Companies Act 2016 that will affect the financial statements of the
Group and of the Company upon its initial adoption are:-
(i)
Removal of the authorised share capital;
(ii) Ordinary shares will cease to have par value; and
(iii) Share premium account will become part of the share capital.
The adoption of the Companies Act 2016 is to be applied prospectively. Therefore, the changes in the accounting
policies and the possible impacts on the financial statements upon its initial adoption will be disclosed in the financial
statements of the Group and of the Company for the financial year ending 31 December 2017.
Notes To The Financial Statements
(cont’d)