JOHANNESBURG - South Africa's JSE Limited, the largest stock exchange on the continent, said on Wednesday it had decided to impose a public censure and the maximum fine of R7.5 million (about US$456,382) on technology group EOH for failing to comply with listing requirements.
In a statement, the JSE said the censure and fine related to material errors in EOH's annual financial statements which the company had to restate.
"A lack of governance and oversight mechanisms, inadequate and ineffective controls and systems in prior financial periods which arose during the tenure of previous executive management resulted in irregularities and fraudulent contracts, premature revenue recognition, unsubstantiated tender payments, and lack of impairment of financial assets, despite impairment indicators that were present," it said.
"Further, EOH incurred VAT (value-added tax) and tax liabilities on suspicious payments regarding fraudulent public sector contracts."
It said EOH’s previously published financial information for the periods 2017 to 2018 did not comply with International Financial Reporting Standards, commonly called IFRS, and this incorrect, false and misleading information was disseminated to shareholders, the exchange and the investing public.
In these circumstances, the JSE found that EOH failed to comply with the exchange's listings requirements.
"For these reasons and with reference to the JSE’s findings of breach, the JSE has decided to impose a public censure and the maximum fine of R7,500,000 on EOH," it said.
Given EOH’s full cooperation and assistance in the JSE’s investigation, the current tough economic climate and the remedial actions undertaken by the board and the interests of shareholders, the exchange said it would suspend R2.5 million of the fine for five years on condition that the company was not found to be in another breach.
It said its move concluded the exchange's process in respect of EOH as a juristic person, but the investigation into the conduct of individuals that presided at the company during the periods in question was ongoing.
In a separate statement, EOH said it accepted the JSE’s findings and its current board of directors had spent a significant amount of time rebuilding credibility through establishing a robust governance framework, creating more transparency within the business and ensuring the accuracy and reliability of the financial information disclosed to the market.
It also continued to work through the remaining legacy issues that it had inherited and remained committed to pursuing legal action against the main perpetrators identified during a forensic investigation by ENSafrica and to try and recover losses.
"Although EOH is disappointed to have received a public censure and fine from the JSE, the EOH board note that this applies to the financial periods approved by the previous management and the findings of the JSE and FRIP (Financial Reporting Investigations Panel) supports the position of the current management team," it said.
- African News Agency (ANA)