香港聯合交易所有限公司
(香港交易及結算所有限公司全資附屬公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)

 

 

Directors must ensure listed issuers have appropriate and effective internal controls in place to ensure compliance with financial reporting obligations as well as integrity and reliability of financial information.

Directors must devote sufficient time and attention to, and take an active interest in, the affairs of the listed issuer, including actively involving themselves in the decision-making process at board meetings.  Failure to do so falls short of the standards expected of directors of listed companies and amounts to a dereliction of their duties.

The appointment of a Compliance Officer is a specific requirement imposed on issuers listed on the Growth Enterprise Market to support GLR compliance and that adequate internal controls are established and maintained.  The appointment carries important responsibilities and is not mere box ticking in having someone appointed to the position.  Directors appointed to the role of Compliance Officers must understand and duly discharge their duties under GLR 5.20.

Breach of duties by Directors and Compliance Officers are viewed seriously by the Exchange.  In addition to disciplinary sanctions where failures are established, the breaches will be taken in account in the Exchange’s assessment of their suitability to be appointed directors of issuers listed or to be listed on the Exchange in future.

The GEM Listing Committee of The Stock Exchange of Hong Kong Limited ("GEM Listing Committee")

CENSURES: 

for failing to exercise care, skill and diligence required of them as directors of the Company in breach of GLR 5.01(6) and their obligations under the Director's Declaration and Undertaking given to The Stock Exchange of Hong Kong Limited (“Exchange”) in the form set out in Appendix 6-A of the GLR to comply with the GLR to the best of their abilities and to use their best endeavours to procure the Company's GLR compliance (collectively, "Undertakings").

The directors identified at (2) to (18) above are collectively referred to as the "Relevant Directors".

The GEM Listing Committee further CENSURES three former Compliance Officers of the Company, Mr Wong, Mr Chan, and Mr Liu, for their respective breaches of GLR 5.20.

The GEM Listing Committee STATES that (i) whilst all Relevant Directors have resigned, had they remained in office, in the opinion of the Exchange, their retention of office would have been prejudicial to the interests of investors; and (ii) the conduct of the Relevant Directors in the matter will be taken into account in the Exchange's assessment of their suitability to be appointed directors of issuers listed or to be listed on the Exchange in future.

On 22 August 2017, the GEM Listing Committee conducted a hearing into the conduct of the Company and the Relevant Directors in relation to their obligations under the GLR and the Undertakings.

On 27 March 2018, the GEM Listing Committee conducted a disciplinary (review) hearing on the application by the Company for a review of the sanction and directions imposed on it by the GEM Listing Committee.

FACTS

Company – delays in publication of financial results and reports

The Company (while under the name of Tai Shing International (Holdings) Limited) failed to publish nine sets of financial results and reports (“Late Accounts”) as they fell due under the GLR as follows:

LISTING DEPARTMENT’S ASSERTION OF BREACHES BY THE DIRECTORS

Of the 17 Relevant Directors,

Breach of the Undertakings to use their best endeavours to procure the Company’s GLR compliance (“Best Endeavours Undertaking”)

The Relevant Directors were collectively and individually responsible for the Company’s GLR compliance.  The Board was collectively responsible for ensuring that the Company had adequate and effective internal controls in place.  The Department asserted that:

Further, none of the Relevant Directors had been able to give meaningful details of the Company’s internal controls that were alleged to exist at the relevant time.  A number of them acknowledged that they had “no recollection” about the Company’s internal controls at all.  This indicated that (a) whatever internal controls the Company had in place (if any), they were not made known to the Relevant Directors; and/or (b) the Relevant Directors did not make any genuine effort to find out and make enquiries with the Company to familiarize themselves with the internal controls. 

The Department therefore asserted that all Relevant Directors breached their Best Endeavours Undertakings by failing to ensure adequate and effective internal controls were in place. 

Breach of GLR 5.01(6)

The Department asserted that by reason of their failure to ensure adequate and effective internal controls were in place within the Company, all 17 Relevant Directors have also respectively breached GLR 5.01(6) by failing to exercise care, skill and diligence as expected of them in performance of their directors’ duties.

The Department further asserted that 15 of the Relevant Directors (Mr Wong, Mr Chan, Mr Ip, Ms Wong, Ms Ju, Mr Zhang, Mr Han, Ms Huang, Dr Pan, Mr Dai, Ms Xiao, Ms Hu, Mr Xu,  Mr Tan and Mr YS Chan), also breached GLR 5.01(6) as evidenced by their different conduct: total reliance on other Directors or other parties for fulfillment of director’s duties; failure to exercise independent judgment; subordinating the director’s power and performance of duty to the will of others; signing of Board minutes upon request without inquiry; and persistent absence from or low rate of attendance at Board meetings to participate in the consideration and approval of matters pertaining to the Company’s business and affairs.

11 Directors – Ms Ju, Mr Zhang, Mr Han, Ms Huang, Dr Pan, Mr Dai, Ms Xiao, Ms Hu, Mr Xu, Mr Tan and Mr YS Chan – had a poor rate of attendance at Board meetings (“BM”) and Audit Committee meetings (“ACM”):：

Some of the Directors offered explanations for their persistent poor attendance at meetings – eg taking care of sick family member, non-payment of director’s fees, resignation as a director of the Company was subject to the decision of the shareholder whose interest he represented on the Board, illness and hospitalization and the Company’s failure to provide draft financial information.  The Department did not accept them to be valid reasons to justify their prolonged non-participation in the meetings.  The Department asserted that such persistent absence from Board meetings (some of them for years) amounted to a failure to take active interest in the affairs of the Company.  They did not resign but continued to hold key positions within the Board of the Company while for years did not actively involve themselves in Board meetings (which is one basic and minimum requirement for directors). 

The Department therefore asserted that the 15 Directors’ conduct identified above amounted to their dereliction of duties as directors of the Company and resulted in their breach of GLR 5.01(6).

Breach of GLR 5.20

Mr Wong, Mr Chan and Mr Liu were successive Compliance Officers (Mr Wong from 4 August 2010 to 5 January 2012; Mr Chan from 6 January 2012 to 24 December 2012; and Mr Liu from 25 December 2012 to 29 July 2014).  The Company’s internal controls during the Core Period were grossly inadequate.  There was nothing to suggest or demonstrate that any of the three Compliance Officers had taken any step in performance of their duty of “advising on and assisting the Board in implementing procedures to ensure the Company’s GLR compliance” – a minimum required of Compliance Officers under GLR 5.20. 

The Department therefore asserted that each of Mr Wong, Mr Chan and Mr Liu breached GLR 5.20.

Breach of Undertakings to comply with the GLR to the best of their abilities

The Department also asserted that by reason of their respective breaches of GLR 5.01(6) and 5.20 referred to above, the Relevant Directors also breached their Undertakings to comply with the GLR to the best of their abilities.

GEM LISTING COMMITTEE'S FINDINGS OF BREACH 

Having considered the Department's submissions and the submissions of the Company and the Relevant Directors, the GEM Listing Committee concluded as follows:

Company

Given the delay with which the Company published its nine sets of financial results and reports as referred to above, the GEM Listing Committee concluded that the Company had repeatedly breached GLR 18.03, 18.48A, 18.49, 18.50C, 18.53, 18.54, 18.66, 18.67, 18.78, and 18.79.

Internal Controls

The GEM Listing Committee also concluded, based on the materials and submissions presented, that the Company did not have adequate and effective internal controls during the Core Period to ensure the Company's compliance with the GLR. 

Relevant Directors

REGULATORY CONCERNS

The GEM Listing Committee regarded the breaches and the Relevant Directors’ conduct in this matter as serious and egregious. They reflect:

 

Further, the prolonged trading suspension resulted in the shareholders and investors not being able to trade in the Company’s shares on the market during the period.  With the auditors’ disclaimer of opinion expressed on the Company’s financial results, those results were of limited value to investors and shareholders of the Company.

The GEM Listing Committee noted that a former INED Mr YS Chan had taken various steps, albeit only after the Core Period, to review and establish internal controls in and after 2014.  This was reflected in the sanction imposed on him.

SANCTIONS

Having made the findings of breach stated above, and having concluded that the breaches are egregious, the GEM Listing Committee decides to:

The GEM Listing Committee also states that whilst all Relevant Directors have resigned, had they remained in office, in the opinion of the Exchange, their retention of office would have been prejudicial to the interests of investors.  Their breaches and conduct in the matter will be taken into account in the Exchange's assessment of their suitability to be appointed directors of issuers listed or to be listed on the Exchange should any of them seek to be so appointed in future.

The GEM Listing Committee further directs: 

 

For the avoidance of doubt, the Exchange confirms that the sanctions and directions detailed in this news release apply only to the Company with regard to the Core Period and the Relevant Directors identified above and not to any other past or present board members of the Company. 

 

Ends