The Consett company's non-executive directors are in the process of commissioning a full investigation into company accounts and transactions after Kennair informed the board he had made a payment into a unit of the company without telling them.
He made the payment during the second half of the year ended September 30, but did not inform the board until January 31.
In a statement released this morning, Romag said Kennair had paid £3.97m into operating subsidiary Romag Ltd to avoid a writedown of payments to clients, and had believed the move was "in the best interests of the company".
Romag said Kennair remains chief executive "with the full backing of the board" as well as a company director. It said it would start the search for a new CEO, and would also be aiming to strengthen its systems and controls with the appointment of a new financial controller and independent non-executive director.