China Rare Earth Holdings (HKG:0769) has set up an independent investigation committee following a whistleblower complaint and internal concerns tied to two subsidiaries and a recent acquisition, according to a late-Sunday Hong Kong bourse filing.

The move comes after a purported employee alleged possible misappropriation of assets at the group's mainland China units.

Preliminary legal due diligence revealed that Yixing Xinwei Leeshing Refractory Materials and Yixing Xinwei Leeshing Rare Earth are involved in lawsuits and debt enforcement actions exceeding their paid-up capital.

The board was also notified of a complaint disputing the validity of a recently completed acquisition of 1,600 kilograms of tungsten bars.

While the acquisition had full board approval, including from the two complainants, the board has decided further investigation is warranted.

The newly formed committee, composed of three independent non-executive directors, will assess the allegations, investigate potential asset misuse, review internal controls, and evaluate the acquisition process.

Trading in the company's shares has been suspended since June 18 and will remain halted until further notice.