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)
The Stock Exchange of Hong Kong Limited
IMPOSES A PREJUDICE TO INVESTORS’ INTERESTS STATEMENT and CENSURE against:
(1) Mr Lu Qingxing, former non-executive director of Universal Star (Holdings) Limited (Delisted, Previous Stock Code: 2346); and
(2) Mr Lyu Zhufeng, former executive director.
The Prejudice to Investors’ Interests Statement is a statement that, in the Exchange’s opinion, had Mr Lu and Mr Lyu remained on the board of directors of the Company, the retention of office by them would have been prejudicial to the interests of investors.
The Exchange found that at the time of the Company’s listing in May 2019, Mr Lu and his son, Mr Lyu, failed to disclose 13 outstanding loans involving a subsidiary of the Company (as co-borrower or guarantor) to the sponsor or the other directors of the Company. The loans amounted to about RMB49 million and were taken out by Mr Lu between April 2017 and April 2019. Almost all the loan proceeds were paid to Mr Lu, while RMB2 million of the loan proceeds were paid to Mr Lyu who subsequently transferred such amount to the subsidiary. The loans constituted material financial liabilities of the Group, but were not disclosed in the Company’s prospectus.
The loans remained outstanding as of August 2020. Without the approval or knowledge of the other directors of the Company, Mr Lu caused the same subsidiary to pledge its property to secure the loans. Neither Mr Lu nor Mr Lyu, who was aware of and involved in the pledge, procured the Company to consult its compliance adviser before the pledge was provided. The pledge constituted a major and connected transaction of the Company and should be disclosed and made conditional on independent shareholders’ approval under the Listing Rules. Neither Mr Lu nor Mr Lyu procured the Company to comply with these requirements.
Mr Lu and Mr Lyu breached their directors’ duties to exercise reasonable skill, care and diligence and act in the interests of the Company. They had failed to procure the Company to comply with the disclosure and approval requirements under the Listing Rules. Given Mr Lu’s benefit from the loan proceeds and the pledge, they had also failed to take steps to avoid or report the conflict of interest to the other directors of the Company.
Mr Lu and Mr Lyu agreed to settle this disciplinary action. They did not contest their respective breaches of the Listing Rules and accepted the two above-mentioned sanctions.
The Securities and Futures Commission (SFC) had assisted in the Exchange’s investigation into this matter by sharing with the Exchange, among others, evidence of the loans, the pledge and payment records of the loan proceeds to facilitate the Exchange’s investigation. This enforcement action highlights the strategic collaboration between the Exchange and the SFC on investigations into cases of mutual concern, by leveraging the complementary investigative powers and regulatory tools at their disposal. The Exchange thanks the SFC’s assistance and will continue its collaboration with the SFC in its enforcement process.
Key messages:
Directors of a listing applicant are primarily responsible for the accuracy and completeness of the listing documents. They must not hide material financial liabilities or other material information from the sponsor and investors. When in doubt, they should consult the sponsor in a timely manner.
Directors also owe fiduciary duties to the issuer. They must safeguard the issuer’s assets, take steps to avoid conflicts of interest and act in the interests of the issuer and its shareholders as a whole. They must also procure the issuer’s compliance with the Listing Rules.
|
Ends