After discovery of the breach, the Company had negotiations with Mr Lai on how to settle the outstanding sums due from Mr Lai and Plotio. At the Board meeting on22 August 2002, the Board considered the matter and approved the settlement terms reached with Mr Lai and Plotio over the payment of the outstanding sums. The Company published an announcement on30 August 2002disclosing the relevant matters and issue a circular on20 September 2002. At the EGM held on18 October 2002, the Company's independent shareholders approved all the transactions and the settlement terms.
According to the Company, all outstanding payments had been cleared by Mr Lai and Plotio by21 February 2003. The Company's subsequent annual accounts for the year ended31 March 2003confirmed that there was no payment due from Mr Lai or Plotio.
As Mr Lai was a substantial shareholder and a director of the Company, he was a connected person of the Company. Following completion of the Disposal Agreement, Plotio became a company controlled and beneficially owned by Mr Lai, hence an associate of Mr Lai and in turn, a connected person of the Company. As a result, the Group's transactions or arrangements resulting in the relevant loans due from Mr Lai and Plotio were connected transactions subject to Chapter 14 of the Exchange Listing Rules in force at the time.
The Company did not disclose or obtain shareholders' prior approval in relation to all three connected transactions or issue circular on them to its shareholders. The Company therefore breached the then Rules 14.26(6)(a) and 14.29.
The Division expressed concerns about the Board procedures and corporate governance of the Company.
Decision
The Listing Committee concluded that: