An audit report for the financial year ending on December 31, 2023, has uncovered several compliance issues at Sonar Bangla Insurance Limited (SBIL), prompting a qualified opinion from the external auditors.
The recently published report highlighted discrepancies in the recognition of bonus shares from Sonar Bangla Capital Management Limited (SBCML), which were recorded as a cost of investment amounting to Tk 1.89 crore from 2016 to 2018.
This accounting treatment has led to an overstatement of assets and equity by the same amount as of December 31, 2023.
Additionally, the non-controlling interest balance was calculated to be Tk 11.44 crore based on the net assets of subsidiaries. However, the consolidated financial statements reported it as Tk 9.59 crore, resulting in an unexplained difference of Tk 1.85 crore.
No reasonable justification for this discrepancy was provided by the management, said the report.
The auditors also pointed out a significant shortfall in unclaimed dividends, which totalled Tk 50 lakh, in violation of the Bangladesh Securities and Exchange Commission (BSEC) directive mandating that unclaimed dividends be presented in financial statements and kept in a separate bank account.
Moreover, the management failed to maintain the Workers' Profit Participation Fund (WPPF) and Gratuity Fund, which is a requirement under the Bangladesh Labour Act of 2006, constituting another non-compliance issue.
In a further breach of regulations, management invested 29.28 per cent of total allowable assets in subsidiary companies, exceeding the permitted limit of 20 per cent as outlined in SRO-353-AlN/2019 by the Insurance Development and Regulatory Authority (IDRA).
The audit report revealed that SBIL reported an investment in shares of Tk 10.54 crore as of December 31, 2023. Despite this significant investment, the management was unable to provide sufficient audit evidence for these transactions, relying solely on portfolio statements and certificates.
A balance of Tk 6.38 crore with securities houses also could not be confirmed, raising further doubts about the company's financial integrity.
Concerns were also raised regarding the company’s disclosure practices related to the Advance Income Tax (AIT) and provisions, with no year-wise breakdown provided for the substantial outstanding amounts.
The management's inability to furnish evidence of shareholder approval for the previous year’s financial statements or conduct an Annual General Meeting (AGM) in 2023 raises additional red flags.
Furthermore, there was a lack of documentation to support the transfer of Tk 45 lakh from the General Reserve to Retained Earnings.
As these compliance issues unfold, stakeholders are urged to closely monitor the situation at SBIL, as the company navigates these significant financial and regulatory challenges.
Sheikh Kabir Hossain, who was the uncle of the ousted prime minister Sheikh Hasina, was in charge for a long time as the chairman of Sonar Bangla Insurance.
He was the president of the Bangladesh Insurance Association (BIA) for almost a decade. He was also the chairman of Central Depository Bangladesh Limited (CDBL) from March 2015.
The paid-up capital of SBIL, which was listed in the capital market in 2016, was Tk 37.50 crore. The total number of shares of the company is 37.7 million. Each share has a face value of Tk 10.
Sponsor/Director holds 39.52 per cent of the company’s total shares, 49.47 per cent of the remaining shares are held by common investors, and institutional investors hold 11.01 per cent of the shares, as of August 2024.
