Zilingo faces enforcement action for failing to file annual returns with ACRA for two years

SINGAPORE — Singapore-based fashion technology start-up Zilingo has faced enforcement action from the Accounting and Corporate Regulatory Authority (ACRA) for not filing its annual returns for two years (2020 and 2021). While ACRA did not specify the exact actions taken against the now-liquidated company, it said enforcement actions could include sending reminders, imposing composition sums, or striking the company off the register. A spokesperson from ACRA said on Thursday (16 Feb) that 77 per cent of companies filed their annual returns on time for the financial year ending in March 2022. In Singapore, it is mandatory for all incorporated companies to file annual returns with ACRA to ensure that their information is up-to-date in the authority's register. Some companies are also required to file their financial statements as part of their annual returns filing. Zilingo has entered liquidation recently. It is reported that Zilingo’s creditors Varde Partners and Indies Capital Partners found a buyer for some of its assets, and they have already been transferred to the new owner for an undisclosed purchase price. In 2019, Zilingo raised US$226M in its Series D financing from Sequoia Capital, Temasek Holdings, Burda Principal Investments, Sofina, Singapore investment fund EDBI and existing investors, bringing the total funds raised by the company to US$308M. Temasek, one of Zilingo's 23 investors, held an 8.3 per cent stake in the company as of 21 June last year. ACRA stated that various resources are available to help company directors understand their responsibilities under the Companies Act, including training programmes and guides on preparing financial statements. ACRA also collaborates with partners like the Singapore Institute of Directors to conduct outreach programmes on good financial reporting practices. It advised companies to invest in training and upskill their finance teams to ensure high-quality financial reporting.

SMS Chee Hong Tat said EDBI and Temasek do engage with investee companies to monitor performance

Last Tuesday (7 Feb 2023), Non-constituency Member of Parliament Leong Mun Wai asked the government with regard to the financial losses suffered by EDBI and Temasek in the recent liquidation of Zilingo. Mr Chee Hong Tat, the Senior Minister of State for Finance, replied to Mr Leong, acknowledging that both EDBI and Temasek did invest in Zilingo, with EDBI in 2018 and Temasek in 2020. “These investment decisions were made independently by the two entities,” Mr Chee said. “EDBI and Temasek typically do not comment on their investments in specific companies, or the performance of these individual investments. The Government’s approach is to review the overall performance of EDBI’s and Temasek’s portfolios, rather than the performance of specific investments, to ensure that they are meeting their respective investment mandates.” In other words, the government would not be commenting on the financial losses suffered by EDBI and Temasek in Zilingo, side-stepping Mr Leong’s questions. However, Mr Chee said that EDBI and Temasek do recognise the inherent risks of investing in startups and do take steps to mitigate these risks.

“Serious financial irregularities”

Last April, news broke that Zilingo’s CEO Ankiti Bose was fired over irregularities found in her company’s accounting. “Following an investigation led by an independent forensics firm that was commissioned to look into complaints of serious financial irregularities, the company has decided to terminate Ms Ankiti Bose’s employment with cause, and reserves the right to pursue appropriate legal action,” the company issued a public statement last May. During fundraising last year, investors began questioning its finances as part of the due diligence process. It led to Temasek and Sequoia Capital starting an internal investigation into the financial practices of the company. It was found that, in fact, the company had not filed any annual financial returns since 2019. Investigators also questioned the way Zilingo had accounted for transactions and revenue. When the fracas started, Temasek pulled back one of its staff who was sitting on the board of Zilingo. In addition to questions about Zilingo’s accounting practices, it was found that payments to several service providers of more than US$7 million were quietly signed by Ms Bose without the knowledge of other senior executives. The payments were said to have gone to about five IT and consulting firms. And according to insiders, it wasn’t clear what services they delivered. The investigators did not identify whether there were links between the Zilingo payments and the CEO. Such a task would require access to bank accounts, which was beyond the scope of the forensic investigation led by the internally appointed investigating team.