SINGAPORE (July 16): China-based backpack manufacturer Dapai International has been hit with a public reprimand by the Singapore Exchange Regulation (SGX RegCo) for making false and misleading statements and disclosures regarding the group’s plans to open 500 retail outlets in China, which was first said to be undertaken in late 2009.

Dapai’s executive chairman Chen Xizhong, former CEO Chen Yong, and former CFO Lawrence Lam were named together with the group in SGX RegCo’s public reprimand issued on Thursday.

In all, the regulator says it is of the view that these three parties – who were then responsible for transactions relating the groups proposed opening of the 500 outlets – failed to “demonstrate the character and integrity expected of directors and management of listed issuers”.

According to SGX RegCo, independent reviews by BDO and Kordamentha have confirmed instances of non-compliance with the bourse’s listing rules. These include false and misleading statements made by the company on the veracity of its 500 outlet openings, as well as payments made to the relevant distributors and contractors.

The investigation follows allegations that various transactions by the group, and certain sales distributors & renovation contractors in relation to Dapai’s said expansion plans were fictitious or misrepresented.

SGX RegCo notes that several “non-factual, false and misleading statements” were made in Dapai’s 2009 and 2010 annual reports, particularly the board’s confirmations given on the system of internal controls suggesting they were adequate to meet the needs of the group in its current business environment.

“[Dapai] had no procedure in place to keep track on how and when the 500 retail outlets were started. There was also no proper centralised documentation in place, the journal entries on payment to distributors and contractors were brief and poor controls were prevalent for the opening of the 500 retail outlets,” observes the regulator in its filing.

Additionally, SGX RegCo says although these matters were highlighted at audit committee meetings in Feb and July 2012 by an internal auditor and Terence Peen, who replaced Lam as CFO since July 2011, no action was taken to address them.  

Dapai was suspended in the trading of its shares since Aug 2017 after it was asked to delist from the SGX’s Mainboard.

In Oct 2017, Dapai announced that no exit offer was made to shareholders by the company nor any major shareholder, with executive chairman Chen citing “a lack of personal funds” for being unable to make the offer.