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
CENSURES:
1. Lisi Group (Holdings) Limited (Stock Code: 526);
IMPOSES A PREJUDICE TO INVESTORS’ INTERESTS STATEMENT1 and CENSURE against:
2. Mr Li Lixin, former executive director;
3. Mr Cheng Jianhe, former executive director;
4. Ms Jin Yaxue, former executive director;
5. Mr Shin Yick Fabian, former independent non-executive director;
6. Mr He Chengying, former independent non-executive director;
7. Mr Kwong Kwan Tong, former independent non-executive director; and
CENSURES:
8. Ms Pang Yuen Shan Christina, former company secretary.
AND FURTHER DIRECTS:
Ms Pang to attend 24 hours of training.
For over 38 months between April 2021 and June 2024, a subsidiary of the Company was found to have made 333 fund transfers (which were interest-free, unsecured and without fixed repayment schedule) to an entity owned by Mr Li, the controlling shareholder and the then Chairman and executive director. The fund transfers constituted 31 discloseable and connected transactions and 191 major and connected transactions (including two advances to entity), but the Company failed to comply with the written agreement, announcement, circular and shareholders’ approval requirements.
Six former directors were found to have breached their directors’ duties in respect of these fund transfers. They also failed to procure the Company to maintain adequate internal controls. The then company secretary was found to have, by action or omission, caused the Company’s breach of the Listing Rules.
In particular, notwithstanding the auditor’s repeated recommendations to eliminate the fund transfers and consider the requirements under the Listing Rules in the audit committee and board meetings for the FY2022 and FY2023 annual results, Mr Li and Mr Cheng continued to approve the Group to make new fund transfers and the other directors at the material time did not take adequate action to address the risks and/or issues. The then company secretary misunderstood that her duties were only administrative and did not advise the board on governance and Listing Rule compliance matters.
As a result, the fund transfers remained undetected or unquestioned across three financial years. It was not until late June 2024, where the auditor made similar recommendations for a third year in a row in the meetings for the FY2024 annual results, that the Company ceased making further fund transfers. All outstanding balance was fully recovered by 30 June 2024.
Separately, Mr Li and Ms Jin were found to have caused another subsidiary of the Company to enter into procurement contracts with three suppliers in March 2024 and prepaid the entire consideration of around RMB244 million. The prepayments constituted two discloseable transactions and one major transaction, but the Company failed to comply with the announcement, circular and shareholders’ approval requirements.
This case is particularly concerning given the Company had repeatedly failed to comply with Chapters 13, 14 and 14A requirements since 2014. Despite being previously warned and sanctioned by the Exchange for similar Listing Rule breaches, the Company still failed to maintain adequate and effective internal controls to prevent and detect the non-compliance.
All parties in this disciplinary action did not contest their respective breaches of the Listing Rules, and accepted the sanctions and directions imposed on them.
Key messages:
Directors must take an active interest in the issuer’s affairs and safeguard the issuer’s interests. Where anything untoward comes to their attention (including issues raised by professional parties), they must exercise reasonable skill, care and diligence to consider, follow up and address them in a timely manner. They must also ensure that the issuer maintains adequate and effective risk management and internal control systems.
In this case, the Exchange highlights the seriousness of the directors’ reckless disregard for their duties as they procured or allowed the issuer to commit repeated Listing Rule breaches over a prolonged period despite the Exchange’s warnings and sanctions.
The Exchange also emphasises its expectations towards and the crucial role of company secretaries under the Listing Rules to (i) assist the board (and in turn the issuer) to comply with the Listing Rules and (ii) promote good corporate governance.
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Note:
- The Prejudice to Investors’ Interests Statement is a statement that, in the Exchange’s opinion, the occupying of the position of director or senior management of the Company or any of its subsidiaries by Mr Li, Mr Cheng, Ms Jin, Mr Shin, Mr He and Mr Kwong may cause prejudice to the interests of investors.
Ends