Hong Kong SFC Files Legal Proceedings for Share Repurchase Order to Protect Independent Minority Shareholders of LET Group & Summit Ascent Due to Alleged Misconduct of Chairman & Controlling Shareholder Lo Kai Bong, Hong Kong SFC Had Instructed Hong Kong Exchange to Suspend Share Trading of LET Group Holdings & Summit Ascent Holdings from 14th February 2024 9 am Because of Substantial Sale of $116 Million Assets in Russia Flagged on 29th January 2024, Asset Indirectly Held by Summit Ascent Holdings via a 77.5% Owned Subsidiary
30th September 2024 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has filed Hong Kong legal proceedings for share repurchase order to protect independent minority shareholders of LET Group & Summit Ascent due to alleged misconduct of Chairman & controlling shareholder Lo Kai Bong. In 2024 February, Hong Kong SFC instructed Hong Kong Exchange (HKEX) to suspend share trading of 2 listed companies LET Group Holdings and Summit Ascent Holdings from 14th February 2024 9 am because of substantial sale of $116 million assets in Russia flagged on 29th January 2024, with the asset indirectly held by Summit Ascent Holdings via a 77.5% owned subsidiary. Hong Kong SFC (27/9/24): “The Securities and Futures Commission (SFC) has commenced legal proceedings under section 214 of the Securities and Futures Ordinance (SFO) in the Court of First Instance to seek a share repurchase order to protect the interests of independent minority shareholders of LET Group Holdings Limited (LET) and Summit Ascent Holdings Limited (Summit Ascent) as a result of alleged misconduct of Mr Lo Kai Bong, chairman, executive director and controlling shareholder of both companies (Notes 1 to 3). The share repurchase order would require Lo, LET and/or Summit Ascent to make an offer to purchase shares from both companies’ minority shareholders independent of Lo at a price and in a manner to be determined by the Court. The alleged misconduct of Lo has resulted in the trading suspension of the shares of LET and Summit Ascent. Since it is uncertain as to whether and when the shares would be able to resume trading, the share repurchase order would provide an exit for independent minority shareholders. As part of the legal proceedings, the SFC is also seeking a disqualification order against Lo for his misconduct towards members of LET and Summit Ascent. The SFC’s investigation found that Lo deliberately disregarded the applicable Listing Rules and the requirements under the Code on Takeovers and Mergers (Takeovers Code) and caused both LET and Summit Ascent to enter into agreements to dispose of their assets in Russia in early 2024. The planned disposal of assets in Russia by both companies would have been considered a very substantial disposal under the Listing Rules. In particular, Lo: 1) disregarded legal advice regarding non-compliance with the Listing Rules and the disapproval by the other directors of LET and Summit Ascent, who subsequently resigned as a result of the planned disposal of assets; 2) caused LET and Summit Ascent to announce that the planned disposal of assets would proceed, without disclosing the non-compliance issues to the shareholders of both companies; and 3) disregarded the regulatory concerns raised by the SFC and the SEHK regarding the non-compliance issues and continued to procure the two companies to proceed with the planned disposal of assets, resulting in the trading suspension of the shares of both companies under section 8(1) of the Securities and Futures (Stock Market Listing) Rules (Note 4). Although the planned disposal of assets was terminated, the SFC alleges that Lo failed to, among other things, disclose all relevant material information to LET and Summit Ascent and their shareholders; apply reasonable skill, care and diligence in the performance of his duties as director of both companies; and ensure their full compliance with the Listing Rules and the Takeovers Code.”
“ Hong Kong SFC Files Legal Proceedings for Share Repurchase Order to Protect Independent Minority Shareholders of LET Group & Summit Ascent Due to Alleged Misconduct of Chairman & Controlling Shareholder Lo Kai Bong, Hong Kong SFC Had Instructed Hong Kong Exchange to Suspend Share Trading of LET Group Holdings & Summit Ascent Holdings from 14th February 2024 9 am Because of Substantial Sale of $116 Million Assets in Russia Flagged on 29th January 2024, Asset Indirectly Held by Summit Ascent Holdings via a 77.5% Owned Subsidiary “
Notes:
- The shares of LET and Summit Ascent have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) since 22 February 2007 and 10 January 1994 respectively. Summit Ascent is a subsidiary of LET, with 66.9% of its shares being indirectly held by LET. At all material times, LET and its subsidiaries, including Summit Ascent, were principally engaged in the development and operation of a resort in the Philippines; the operation of a hotel and gaming business in Russia; property development in Japan; and the management and operation of malls in mainland China.
- Section 214(2)(d) of the SFO provides that the Court may order that a person found to be wholly or partly responsible for the company’s affairs having been conducted in a manner involving misfeasance or other misconduct towards it or its members, shall not be, or continue to be, a director, or in any way, whether directly or indirectly, be concerned, or take part, in the management of any corporation for a period of up to 15 years.
- 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 Instructs Hong Kong Exchange to Suspend Share Trading of LET Group Holdings & Summit Ascent Holdings from 14th February 2024 9 am Because of Substantial Sale of $116 Million Assets in Russia Flagged on 29th January 2024, Asset Indirectly Held by Summit Ascent Holdings via a 77.5% Owned Subsidiary
14th February 2024 – The Hong Kong Securities & Futures Commission (SFC) has instructed Hong Kong Exchange (HKEX) to suspend share trading of 2 listed companies LET Group Holdings and Summit Ascent Holdings from 14th February 2024 9 am because of substantial sale of $116 million assets in Russia flagged on 29th January 2024, with the asset indirectly held by Summit Ascent Holdings via a 77.5% owned subsidiary. Hong Kong SFC: “The Securities and Futures Commission (SFC) has directed The Stock Exchange of Hong Kong Limited (SEHK) to suspend dealings in the shares of LET Group Holdings Limited (LET) and Summit Ascent Holdings Limited (Summit Ascent) under the Securities and Futures (Stock Market Listing) Rules (SMLR) with effect from 9:00 am on 14 February 2024 (Notes 1 to 3). The SFC took action due to concerns regarding a very substantial disposal (VSD) of a major asset of LET and Summit Ascent, namely, the sale of assets in Russia for US$116 million, which came to its attention on 29 January 2024. The major asset was at all material times indirectly held by Summit Ascent through a 77.5% owned subsidiary (Note 4). The VSD is subject to the reporting, announcement, circular and approval of shareholders of both companies under Chapter 14 of the Listing Rules (LR). Since there was a change in control of LET in May 2022, any material disposal under Rule 14.06E of the LR is restricted for a period of 36 months from the change in control unless the remaining group after the change in control can meet the requirements of Rule 8.05 of the LR (Note 5). It appears to the SFC that after the completion of the VSD, LET and Summit Ascent may not have a business with a sufficient level of operations and assets of sufficient value to support their operations to warrant a continued listing status of their shares under Rule 13.24 of the LR. As a result, LET and Summit Ascent may not be regarded as suitable for listing under the LR (Note 6). The SFC also noted that LET and Summit Ascent are required to consult the Takeovers Executive under Note 7 to Rule 2 of the Code on Takeovers and Mergers (Takeovers Code) and meet the requirements under Rule 2.10 of the Takeovers Code. This includes obtaining shareholders’ approval of the VSD in a general meeting, with the VSD being approved by at least 75% of the votes cast by disinterested shareholders at the meeting and the disapproving votes representing not more than 10% of the votes attached to all disinterested shares.” See below for more info:
Hong Kong SFC Instructs Hong Kong Exchange to Suspend Share Trading of LET Group Holdings & Summit Ascent Holdings from 14th February 2024 9 am Because of Substantial Sale of $116 Million Assets in Russia Flagged on 29th January 2024, Asset Indirectly Held by Summit Ascent Holdings via a 77.5% Owned Subsidiary
14th February 2024 – The Securities and Futures Commission (SFC) has directed The Stock Exchange of Hong Kong Limited (SEHK) to suspend dealings in the shares of LET Group Holdings Limited (LET) and Summit Ascent Holdings Limited (Summit Ascent) under the Securities and Futures (Stock Market Listing) Rules (SMLR) with effect from 9:00 am on 14 February 2024 (Notes 1 to 3).
The SFC took action due to concerns regarding a very substantial disposal (VSD) of a major asset of LET and Summit Ascent, namely, the sale of assets in Russia for US$116 million, which came to its attention on 29 January 2024. The major asset was at all material times indirectly held by Summit Ascent through a 77.5% owned subsidiary (Note 4).
- The VSD is subject to the reporting, announcement, circular and approval of shareholders of both companies under Chapter 14 of the Listing Rules (LR). Since there was a change in control of LET in May 2022, any material disposal under Rule 14.06E of the LR is restricted for a period of 36 months from the change in control unless the remaining group after the change in control can meet the requirements of Rule 8.05 of the LR (Note 5).
- It appears to the SFC that after the completion of the VSD, LET and Summit Ascent may not have a business with a sufficient level of operations and assets of sufficient value to support their operations to warrant a continued listing status of their shares under Rule 13.24 of the LR. As a result, LET and Summit Ascent may not be regarded as suitable for listing under the LR (Note 6).
- The SFC also noted that LET and Summit Ascent are required to consult the Takeovers Executive under Note 7 to Rule 2 of the Code on Takeovers and Mergers (Takeovers Code) and meet the requirements under Rule 2.10 of the Takeovers Code. This includes obtaining shareholders’ approval of the VSD in a general meeting, with the VSD being approved by at least 75% of the votes cast by disinterested shareholders at the meeting and the disapproving votes representing not more than 10% of the votes attached to all disinterested shares.
- However, it appears to the SFC that the VSD has not complied with the above-mentioned requirements. In particular, the sale and purchase agreement relating to the VSD had been executed and the completion of which was not made subject to obtaining the required approval of shareholders.
- The SFC has asked LET and Summit Ascent to address its concerns by providing an undertaking that the completion of the VSD is made conditional on shareholders’ approval and in full compliance with the relevant rules and regulations. However, both companies have failed to respond to the SFC. The SFC also has serious concerns about the conduct of the two companies and their management.
- The SFC considers that suspending the dealings in the shares of LET and Summit Ascent is desirable for the purpose of maintaining a fair and orderly market and protecting the interest of the investing public.
The SFC’s investigation is ongoing.
Notes:
- LET holds a 69.66% stake in Summit Ascent.
- At the requests of LET and Summit Ascent, trading in their respective shares have been suspended since 11 January 2024 pending release of inside information.
- Under section 8(1) of the SMLR, the SFC has the power to direct the SEHK to suspend dealings in shares of a listed company where:
- any materially false, incomplete or misleading information has been included in any document issued in connection with its listing of securities or in announcement, statement, circular or other document made or issued by it or on its behalf;
- it is necessary or expedient in the interest of maintaining an orderly and fair market in securities traded on the SEHK;
- it is in the interest of the investing public or in the public interest, or it is appropriate for the protection of investors generally or for the protection of investors in the shares of the listed company; or
- there has been a failure to comply with any condition imposed by the board of the SFC when permitting resumption of trading under section 9(3)(c) of the SMLR.
- Under 14.06(4) and 14.07 of the LR, a transaction is classified as a very substantial disposal if the assets disposed of accounts for 75% or more of the listed company’s total assets, or the profits or revenue attributable to the assets disposed of accounts for 75% or more of the listed company’s consolidated revenue or profits, or the consideration for the disposal represents 75% or more of the listed company’s market capitalisation at the time of the disposal.
- Under 14.06E of the LR, a listed company may not carry out a disposal of all or a material part of its existing business for a period of 36 months from a change in control unless the remaining group, after such change in control, can meet the requirements of 8.05 of the LR, which sets out the minimum requirements in terms of profit, market capitalisation, revenue or cash flow a listing applicant must satisfy in order to be listed. A disposal by a listed company which does not meet the above requirement will result in the listed company being treated as a new listing applicant.
- Under 13.24 of the LR, a listed company shall carry out, directly or indirectly, a business with a sufficient level of operations and assets of sufficient value to support its operations to warrant the continued listing of the company’s securities.
- Note 7 to Rule 2 of the Takeovers Code states that the requirements of Rule 2.10 of the Takeovers Code would normally apply if a company proposes to dispose of its assets and/or operations, and as a result of such proposal the company may not be regarded as suitable for listing for the purpose of the LR.
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