When a company doesn't know how its money has gone missing

It is perilous not to keep proper records of your money because the absence of such documents would make it very hard for you to reclaim your cash if it ever goes missing

- Tan Ooi Boon

A company director who lent a large sum to help his firm expand its business found himself embroiled in a corporate comedy of errors after being accused of stealing money that was his in the first place.

Much of the debacle stemmed from the fact that the firm - a bakery chain - seemed to have poor financial checks and a lack of proper records on how its funds were being used.

The saga began when the company director volunteered to lend the firm $150,000 so it could open another branch after his fellow shareholders ignored calls from the company's boss for a fund injection.

But the offer to help came at possibly the worst time because the finance manager, who compiled paperwork for the loan, was later found to have pocketed around $400,000 of company funds.

So when the director asked for the return of his $150,000, he and the managing director, who had approved this repayment, were accused of being in cahoots with the finance manager.

This case serves as a warning for businesses to tighten their financial and audit controls because no one in this bakery chain had a clue about how much of its money was missing, until the rogue manager confessed after being caught.

The company then launched an unusual lawsuit to go after the director, the managing director and the rogue manager, accusing them of a "conspiracy to misappropriate" involving "all transactions that looked suspicious, could not be explained or where supporting documents could not be found".

High Court Judge Hri Kumar Nair noted that the lawsuit succeeded only in showing that the bakery chain "lacked proper financial controls" as its suit was filed "without evidence that the defendants had taken or benefitted from the monies".

Not surprisingly, the company could not support its accusation that the director and the managing director were working with the finance manager to siphon money from the accounts.