Hong Kong SFC Disqualifies 3 Directors of National Agricultural Holdings for Misconduct over $391 Million of Transactions, Including Inappropriate Transfers & Failure to Pay for Shares Subscribed
24th June 2023 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has obtained disqualification orders (Court of First Instance) against 3 directors of delisted Hong Kong company National Agricultural Holdings for misconduct over $391 million of transactions, including inappropriate transfers and failure to pay for shares subscribed. The 3 directors are former executive director Liu Yong, 2 former independent non-executive directors,Kathy Chiu Kam Hing William Fan Chung Yue. Hong Kong SFC: “The orders were made after Liu, Chiu and Fan admitted that they were in breach of their duties to NAH. The Court found that they had allowed NAH’s affairs to be dominated by Chen and others for personal advantage. They neglected or omitted to identify or rectify the misconduct or breach of duties by Chen and others. They also failed to raise concerns, queries or seek necessary information in relation to the significant and questionable transactions. Liu as an executive director was in breach of his duties to NAH. Chiu and Fan, as independent non-executive directors, were also in breach of their duties to NAH in failing to exercise independent judgement and supervision.” The investigations revealed that 1) Parko acquired 212,194,500 shares in NAH pursuant to a subscription agreement with NAH, but it failed to pay the consideration of HK$676,688,260.5 to NAH when the shares were allotted to it on 9 June 2015 2) Chen and others transferred HK$384 million to a company between January and June 2015 purportedly to establish an investment fund for NAH. The money was used for other purposes unrelated to NAH and part of it was transferred to Parko 3) a sum of RMB1.85 billion, being the refund arising from two lapsed transactions which was deposited into NAH’s accounts in August 2017, was shortly transferred out of NAH through a series of dubious transactions for unknown purposes; and 4) Chen Li-Jun transferred HK$50 million from NAH to a company connected to him without justifiable reasons in 2015 and concealed it under the guise of NAH lending money to another company. More info below.
“ Hong Kong SFC Disqualifies 3 Directors of National Agricultural Holdings for Misconduct over $391 Million of Transactions, Including Inappropriate Transfers & Failure to Pay for Shares Subscribed “
Hong Kong SFC Disqualifies 3 Directors of National Agricultural Holdings for Misconduct over $391 Million of Transactions
23rd Jun 2023 – The Securities and Futures Commission (SFC) has obtained disqualification orders in the Court of First Instance against a former executive director Mr Liu Yong, and two former independent non-executive directors, Ms Kathy Chiu Kam Hing and Mr William Fan Chung Yue of National Agricultural Holdings Limited (NAH) (Notes 1 & 2).
Liu was disqualified for three years while Chiu and Fan for 20 months, from (i) being, or continuing to be, a director, liquidator, or receiver or manager of the property or business of any corporation in Hong Kong including NAH or any of its subsidiaries and affiliates and (ii) in any way, directly or indirectly, being concerned, or taking part, in the management of any corporation in Hong Kong. They were also ordered to pay the SFC’s costs in the proceedings (Notes 3 & 4).
The Court proceedings followed the SFC’s investigations into allegations of a series of misconduct orchestrated by NAH’s controlling shareholder Parko (Hong Kong) Limited (Parko), the former chairman Mr Chen Li-Jun and three other senior officers of NAH (Chen and others) from 2015 to 2017 (Note 5).
The investigations revealed that:
- Parko acquired 212,194,500 shares in NAH pursuant to a subscription agreement with NAH, but it failed to pay the consideration of HK$676,688,260.5 to NAH when the shares were allotted to it on 9 June 2015;
- Chen and others transferred HK$384 million to a company between January and June 2015 purportedly to establish an investment fund for NAH. The money was used for other purposes unrelated to NAH and part of it was transferred to Parko;
- a sum of RMB1.85 billion, being the refund arising from two lapsed transactions which was deposited into NAH’s accounts in August 2017, was shortly transferred out of NAH through a series of dubious transactions for unknown purposes; and
- Chen Li-Jun transferred HK$50 million from NAH to a company connected to him without justifiable reasons in 2015 and concealed it under the guise of NAH lending money to another company.
The orders were made after Liu, Chiu and Fan admitted that they were in breach of their duties to NAH. The Court found that they had allowed NAH’s affairs to be dominated by Chen and others for personal advantage. They neglected or omitted to identify or rectify the misconduct or breach of duties by Chen and others. They also failed to raise concerns, queries or seek necessary information in relation to the significant and questionable transactions. Liu as an executive director was in breach of his duties to NAH. Chiu and Fan, as independent non-executive directors, were also in breach of their duties to NAH in failing to exercise independent judgement and supervision.
The SFC’s proceedings against NAH, Parko and the other former directors and senior officers of NAH are ongoing (Note 6).
Notes:
- The SFC commenced proceedings under section 214 of the Securities and Futures Ordinance in January 2021.
- NAH’s shares were listed on the GEM Board of Stock Exchange of Hong Kong Limited (SEHK) on 17 December 1999 and the Main Board of the SEHK on 29 August 2011. The listing of its shares was cancelled with effect from 22 November 2019.
- Liu was an executive director of NAH from 1 July 2014 to 13 May 2016. Chiu was an independent non-executive director of NAH and Chairman of the Audit Committee from 2 December 1999 to 8 November 2019. Fan was an independent non-executive director of NAH and a member of the Audit Committee from 12 January 2015 to 8 November 2019.
- The judgement is available on the Judiciary’s website (Case No.: HCMP 36/2021).
- The three other senior officers are: former general manager, Mr Cai Weiheng, former financial manager/financial controller, Ms Lu Ying and former general manager’s assistant, Ms Chen Jing.
- The other former directors and senior officers of NAH who are respondents in the proceedings, are Chen Li-Jun, Cai, Lu, Chen Jing, and four former executive directors Mr Ren Hai, Mr Peng Guojiang, Mr Chen Li An and Ms Wen Yuanyi, as well as a former independent non-executive director Mr Ting Tit Cheung.
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