This article first appeared in The Edge Financial Daily, on January 21, 2016.

KUALA LUMPUR: Nexgram Holdings Bhd, which announced yesterday that its external auditor Messrs CHI-LLTC (CHI) had tendered its resignation, will be appointing a special auditor to address concerns raised about the existence of certain assets belonging to three of its subsidiaries.

Bursa Securities had, vide a letter last Friday, informed Nexgram that it was unable to proceed with the processing of the listing application and draft circular in relation to the takeover offer by Nexgram for Ire-Tex Corp Bhd until its enquiries are satisfactorily addressed.

The regulator had also requested the steps that Nexgram is taking to address Bursa’s enquiries and implications of the takeover offer be announced.

In the interim, Nexgram said in a bourse filing yesterday it had compiled and shown to the due diligence committee documents and statements in relation to certain assets of the group that is in contention.

It has also scheduled and authorised representatives of the due diligence committee to travel directly to Indonesia for purposes of conducting an independent verification of those certain assets of Nexgram in order to address Bursa’s enquiries.

In addition, Nexgram said the board is “taking steps to identify an independent qualified accounting firm to undertake the role of special auditor”.

The group also warned that in the event Bursa decides not to proceed with the processing of the listing application and draft circular, the takeover offer will not succeed.

“That’s [because] the condition of the [takeover] offer of obtaining Nexgram shareholders’ approval in an extraordinary general meeting will not be met within the stipulated time frame under the code,” added Nexgram.

In a separate filing yesterday, Nexgram said CHI had resigned, vide its letter in January, “due to the company’s recent expansion plan and the unavailability of CHI’s workforce, which has decreased recently, to handle the increasing work”.

CHI’s resignation will be effective only after a new auditor has been appointed. The new auditor — for the financial year ending April 30, 2016 — will only be appointed in an extraordinary general meeting to be convened, said Nexgram.

“The board also wishes to inform that the company is not aware of any other matters that need to be brought to the attention of the shareholders of the company with regard to CHI’s resignation,” it added.

Last Friday, the Securities Commission Malaysia raised a red flag over the conduct of Nexgram in disposing of three of its subsidiaries while still in the midst of making a voluntary takeover offer for Ire-Tex. Nexgram on Nov 20, 2015 made the bid for Ire-Tex.

The three subsidiaries are Nexgram Resources Sdn Bhd, Godynamic Investments Ltd and PT Semesta Tirta Antara Raya (Indonesia).

Nexgram shares closed unchanged at seven sen yesterday, valuing them at RM112.94 million.