in respect of
Mrs. Eleanor Law Kwai Chun Kwok,
Mr. Edward Chou Fan Chen
Mr. Peter Hang Chan Tong (resigned as at 20th May 2000)
(collectively, the "Relevant Directors")
Sa Sa International Holdings Limited (the "Company")
The Exchange hereby publicly criticises each of the Relevant Directors for breach of the Declaration and Undertaking with regard to Directors given by her/him to the Exchange in the form set out in Appendix 5B to the Exchange Listing Rules (the "Director's Undertaking").
The Listing Committee of the Exchange (the "Listing Committee") has recently conducted a disciplinary hearing into the conduct of, among others, the Company, Mrs. Eleanor Law Kwai Chun Kwok (an executive director of the Company), Mr. Edward Chou Fan Chen (an executive director of the Company) and Mr. Peter Hang Chan Tong (a former executive director of the Company), in relation to certain connected transactions as disclosed in an announcement issued by the Company on 3 August 1999.
Prior to and in connection with the Company's initial public offering (the "IPO") in June 1997, Mr. Simon Siu Ming Kwok ("Mr. Kwok"), the Chairman and an executive director of the Company, had personally agreed to give 52.48 million shares in the Company to his personal consultant (the "Consultant"). The arrangement (the "Arrangement") was disclosed in the listing prospectus of the Company (the "Prospectus"). Subsequent to the IPO, the connected transactions arose from a payment made by the Company to a nominee of Mr. Kwok, which was purported to represent a partial reimbursement of the Arrangement.
At a meeting of the Company's then executive directors, which included the Relevant Directors, on 15 August 1997, it was unanimously resolved to approve the payment of the sum of HK$38,220,134.40 (the "First Sum") to the Consultant. This approval was given based on the advice of Mr. Johnnie Sai Kei Cheng ("Mr. Cheng") to Mr. Kwok that expenses incurred in connection with the IPO should normally be borne by the Company.
On 22 January 1998, Sa Sa Cosmetic Company Limited ("Sa Sa Cosmetic"), a subsidiary of the Company, paid an amount of HK$40,660,987.37 (comprising the First Sum and interest) to a nominee of Mr. Kwok (the "First Payment").
In June 1998, upon receiving subsequent advice from Mr. Cheng that the First Payment had been made in contravention of the Arrangement disclosed in the Prospectus, Mr. Kwok repaid an amount equal to the First Payment to Sa Sa Cosmetic in two tranches (the "Second Payment") on 29 and 30 June 1998.
It was not disputed by the Relevant Directors that the First Payment and the Second Payment constituted connected transactions for the purpose of the Exchange Listing Rules. The First Payment represented approximately 15.7% of the consolidated net tangible assets of the Company as at 31 March 1997 and the Second Payment represented approximately 3.6% of the consolidated net tangible assets of the Company as at 31 March 1998.
Rule 14.26(6)(a) of the Exchange Listing Rules requires that connected transactions are subject to prior independent shareholders' approval in a general meeting. Rule 14.29 of the Exchange Listing Rules further requires a listed issuer to notify the Exchange as soon as possible after the terms of connected transactions have been agreed. In the event, neither Rule 14.26(6)(a) nor Rule 14.29 of the Exchange Listing Rules was complied with.
The Listing Committee concluded that there were breaches of, among other things, Rules 14.26(6)(a) and 14.29 of the Exchange Listing Rules in respect of the First Payment and the Second Payment.
The Listing Committee also concluded that by virtue of the above breaches of the Exchange Listing Rules, the Relevant Directors breached their Director's Undertaking, under which they undertook to comply to the best of their ability with the Exchange Listing Rules from time to time in force and to use their best endeavours to procure that the Company would comply with the latter.
Accordingly, each of the Relevant Directors is hereby publicly criticised by the Listing Committee for breach of the Director's Undertaking to comply to the best of her/his ability with the Exchange Listing Rules from time to time in force and to use her/his best endeavours to procure that the Company complied with the Exchange Listing Rules.
For the avoidance of doubt the Exchange confirms that in relation to this matter it is hereby not publicly criticising the Company, or any present or former member of the Board of Directors of the Company, save for the Relevant Directors.