Hong Kong Court Orders HK & SG Listed Co. Sound Global Ltd Chairman Wen Yibo to Buy Shares from Shareholders at Court-Determined Price in Landmark Ruling, 12 Years Disqualification for Inflating Bank Balances by $379 Million
13th October 2022 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has obtained an order (from Hong Kong court) on former Hong Kong & Singapore listed company Sound Global Ltd Chairman Wen Yibo to buy shares from other shareholders at a court-determined price in a first-of-its-kind landmark ruling (under section 214 of the HK Securities & Futures Ordinance ~ SFO), with a further 12 years disqualification as a director or management of any corporation for inflating bank balances by $379 million (RMB 2.72 billion) in 2013. Hong Kong Court: “The Court was satisfied that as a result of Wen’s scheme, which involved five bank accounts maintained by Sound Global’s subsidiaries at two Mainland banks for the financial years of 2011, 2012 and 2013, the bank balances of the company’s subsidiaries were inflated by RMB 2.18 billion and RMB 2.72 billion as at 31 December 2012 and 2013 respectively, representing 82% and 89% of the net assets of Sound Global as reported in its 2012 and 2013 annual reports.” Ashley Alder, the SFC’s Chief Executive Officer: “The share purchase order represents an important milestone in the SFC’s efforts to protect the investing public from wrongful conduct by management of listed companies and our determination to deploy our full range of regulatory tools to tackle market misconduct and uphold market integrity.” See below for more information.
“ Hong Kong Court Orders HK & SG Listed Co. Sound Global Ltd Chairman Wen Yibo to Buy Shares from Shareholders at Court-Determined Price in Landmark Ruling, 12 Years Disqualification for Inflating Bank Balances by $379 Million “
Sound Global is an investment holding company listed on the Singapore Exchange Securities Trading Limited and on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) (former stock code: 967) since 6 October 2006 and 30 September 2010 respectively. It was voluntarily delisted from the Singapore Exchange Securities Trading Limited on 27 January 2014 and was delisted by the SEHK with effect from 13 September 2022.
Section 214(2)(e) of the SFO provides that the Court may “make any other order it considers appropriate, whether for regulating the conduct of the business or affairs of the corporation in future, or for the purchase of the shares of any members of the corporation by other members of the corporation…”
Hong Kong SFC Statement
- Court orders Sound Global to purchase shares from investors
The Securities and Futures Commission (SFC) has obtained an order in the Court of First Instance against the chairman and executive director of Sound Global Ltd. (Sound Global), Mr Wen Yibo, to purchase shares held by the other shareholders of the company at a price to be determined by the Court – after he was found to have orchestrated a scheme to falsify the company’s bank balances and fabricated relevant bank statements and balance confirmations (Notes 1 to 3).
The order was the first of its kind made under section 214 of the SFO (Note 4).
The Court also issued a disqualification order for 12 years against Wen, who was ordered to pay the SFC’s costs on an indemnity basis (Note 5).
The Court was satisfied that as a result of Wen’s scheme, which involved five bank accounts maintained by Sound Global’s subsidiaries at two Mainland banks for the financial years of 2011, 2012 and 2013, the bank balances of the company’s subsidiaries were inflated by RMB 2.18 billion and RMB 2.72 billion as at 31 December 2012 and 2013 respectively, representing 82% and 89% of the net assets of Sound Global as reported in its 2012 and 2013 annual reports.
Mr Ashley Alder, the SFC’s Chief Executive Officer said: “The share purchase order represents an important milestone in the SFC’s efforts to protect the investing public from wrongful conduct by management of listed companies and our determination to deploy our full range of regulatory tools to tackle market misconduct and uphold market integrity.”
The SFC would like to acknowledge and thank the China Securities Regulatory Commission for its assistance in the investigation of this case.
Notes:
- Sound Global is an investment holding company listed on the Singapore Exchange Securities Trading Limited and on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) (former stock code: 967) since 6 October 2006 and 30 September 2010 respectively. It was voluntarily delisted from the Singapore Exchange Securities Trading Limited on 27 January 2014 and was delisted by the SEHK with effect from 13 September 2022.
- Wen is the founder of Sound Global, and had been a chairman and executive director of the company since 7 November 2005.
- On 13 April 2016, trading in Sound Global’s shares was suspended pursuant to Rule 8(1) of Securities and Futures (Stock Market Listing) Rules. On 14 June 2019, the SFC commenced proceedings under section 214 of the Securities and Futures Ordinance (SFO) against Sound Global and others.
- Section 214(2)(e) of the SFO provides that the Court may “make any other order it considers appropriate, whether for regulating the conduct of the business or affairs of the corporation in future, or for the purchase of the shares of any members of the corporation by other members of the corporation…”
- Section 214(2)(d) of the SFO provides that the Court may order that a person shall not be or continue to be a director or in any way be involved, directly or indirectly, in the management of any corporation for a period of up to 15 years.
- The judgment is available on the Judiciary’s website (Court Reference: HCMP868/2019).
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