Hong Kong’s Securities and Futures Commission (SFC) is pursuing legal proceedings in Hong Kong’s Court of First Instance against the former chairman and directors of a Bermuda company, Inno-Tech Holdings Limited (Inno-Tech), over alleged misconduct that caused the company to lose more than HK$125 million.
The proceedings are being brought pursuant to section 214 of Hong Kong’s Securities and Futures Ordinance.
Inno-Tech was incorporated in Bermuda on 19 November 2001 as a limited liability company, and it was registered in Hong Kong under the now repealed Part XI of the Companies Ordinance, Cap 32, as an overseas company on 1 March 2002. Its shares were listed on the Growth Enterprise Market Board of the Stock Exchange of Hong Kong Limited on 12 August 2002 and continue to be listed on that exchange. Trading in the shares of Inno-Tech was suspended on 26 January 2015, but has resumed since 15 August 2016.
The SFC alleges that Inno-Tech’s former chairman and director, Ms Wong Yuen Yee, and three former directors, namely Mr Robert Wong Yao Wing, Mr Wong Kwok Sing and Mr Lam Shiu San, breached their duties as directors in relation to the acquisitions and/or disposals of interests in three hotels and a gold mine on the Mainland between 2007 and 2010 resulting in substantial and material losses to Inno-Tech.
Specifically, the SFC alleges that the four former directors have failed to:
- carry out adequate investigation into or due diligence prior to the acquisitions of the interests in the three hotels and the gold mine;
- negotiate the consideration for acquiring the interests in the three hotels and the gold mine;
- assess or to obtain any independent assessment of whether an investment in the gold mine was a commercially suitable or an appropriate one for Inno-Tech;
- assess the purchase price of the interests in the gold mine properly;
- give adequate consideration to who would be appropriate to appoint as directors and/or who to put in charge in respect of gold mining matters; and
- supervise the running of the gold mine properly.
The SFC is seeking orders that the four former directors be disqualified as company directors and that the four former directors be ordered to pay compensation to Inno-Tech directly.
The former directors are contesting the proceedings.
In a recent interlocutory judgment published on 1 September 2016, Mr. Justice Anthony Chan has rejected the SFC’s application for leave to file and serve expert opinion evidence on issues of Mainland Chinese law, in support of its allegations.
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