SINGAPORE (Jan 21) Lai Choong Hon, an executive director of AA Group, is being investigated by the Commercial Affairs Department in relation to an offence under the Securities and Future Act.

No further details on the nature of the investigation have been revealed, the company announced.

Lai was appointed as the company’s executive director on Jan 18 2018. He is concurrently its financial controller, was responsible for all finance, treasury, reporting and accounting activities in the company.

For the half year ended June 30 2019, AA Group reported 16.9% increase in revenue to $11.5 million, from $9.8 million in the year earlier period.

However, losses in the same period surged 1,679% from $214,000 to $3.81 million, which the company blames on an impairment of loans made to Epicentre Pte Ltd and Broadwell Limited for $1.82 million and $2.34 million respectively.

According to AA Group’s 2018 annual report, it carried on its books a $2 million loan to an unnamed “third party company” which is a wholly owned subsidiary of a Catalist listed company.

This loan carried an interest of 8% per year and was due for payment on April 17 2019. The repayment date was then to be extended by two terms of six months each.

As part of the supplementary agreement for the extension of due date, AA Group would accept repayment in the form of new shares in the said listed company at 10% discount to the market price, in the event the borrower couldn’t pay back using cash.

Missing Lim of Epicentre

The investigation of Lai came nearly half a year after AA Group found itself at the receiving end of demand for repayment of money it claims it did not borrow.

On Aug 14 2019, AA Group announced that it had “recently come to know” of various financing agreements made by one Kenneth Lim Tiong Hian, Broadwell Limited and, or Capital Alliance Holdings Corporation.

A month earlier, one Gema Blasco Martinez, served letters of demand on AA Group, asking for repayment of two sums of money: $156,400 carrying a 12% interest, and $230,000, carrying 15% interest.

AA Group is trying to draw a line between itself and Lim. It claims that the financing agreement was “fraudulently and allegedly” signed by Lim, who is not and has never been a director, officer or employee of the Company or any of its subsidiaries, on behalf of the Company.

AA Group’s own executive director Lai, meanwhile, is an independent director of Epicentre Holdings.

“The Board understands, from SGXNet announcements and media reports, that Mr Lim who is the executive chairman and acting CEO of Epicentre Holdings Limited, has been uncontactable since 24 May 2019,” the company states.

Epicentre Holdings, meanwhile, is likely the listed parent company
Pte Ltd, the entity which borrowed money from AA Group.

Shares of Epicentre Holdings have been suspended since May last year.

Lai's probe by the CAD was announced in a separate statement on Jan 22 by Epicentre Holdings.

"Full cooperation"

Lai, according to the company, had provided his full cooperation with the CAD and the company’s nominating committee has recommended that he continue with his normal roles and responsibilities.

Besides his ID post at Epicentre Holdings, Lai is also CEO of Engineering Manufacturing Services (S), a subsidiary of AA Group, which operates a mixed bag of other business activities such as leasing, supply of ready-mix concrete, manufacturing of concrete items and underground cable installation and road reinstatement services

According to the company’s profile on the board of directors, Lai, was previously with Hong Guan Technologies (S). He was also a former finance manager of the government-linked Chartered Semiconductor Manufacturing.

“His ability to oversee or manage the company has not been compromised,” states Tan Poh Guan, another AA Group executive director in the company’s SGX announcement on Jan 21.

The board says the business and operations of the company have not been affected and will continue as usual. The company will monitor the progress of the investigation and make further announcement when there are any updates.

On Jan 21, price of AA Group shares dropped 0.1 cent to 10 cents, which values the company at $17.8 million.