SECURITIES AND FUTURES COMMISSION v. XU JINPEI AND OTHERS

SECURITIES AND FUTURES COMMISSION v. XU JINPEI AND OTHERS

On the basis of the admitted and agreed facts, the Court was satisfied that the Company’s consolidated bank balances were substantially overstated by omission and fabrication in subsidiary ledgers and supporting documents, that those overstatements fell within s.214(1)(b),(c) and (d) of the SFO, and that the 6th Respondent negligently breached his duties as an INED and Audit Committee member by failing to supervise, investigate and ensure adequate internal controls; accordingly a disqualification order for three years and payment of agreed costs was appropriate and proportionate given the gravity and admitted mitigating factors.

Citation
[2023] HKCFI 2908
Parties
Petitioner: Securities and Futures Commission; 1st Respondent: Xu Jinpei (許金培); 2nd Respondent: Hong Yinzhi (洪蔭治); 3rd Respondent: Wang Zhihong (王志洪); 4th Respondent: Li Yuna (李宇娜); 5th Respondent: Hung Yvonne (洪綺婉); 6th Respondent: Chiu Sai Chuen Nicholas (趙世存); 7th Respondent: Chu Wai Wa Fangus (朱偉華); 8th Respondent: Ong King Keung (王競強)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
20 November 2023
Case Number
HCMP572/2022
Procedural Posture
Section 214 Petition Under the Securities and Futures Ordinance / Summary Disposal Under the Carecraft Procedure (reasons for Decision)
Outcome
Judgment by consent under Carecraft procedure: 6th Respondent disqualified from acting as a director or otherwise participating in management for 3 years and ordered to pay the Petitioner’s agreed costs
Legal Topics
Director Disqualification, Misfeasance and Misconduct, Misrepresentation of Financial Statements, Audit and Internal Controls Failure, Carecraft Summary Procedure, Disclosure Obligations
Source Language
EN
Securities Law Company Law Corporate Governance Regulatory Enforcement Financial Crime Investigations Director Disqualification Misfeasance and Misconduct Misrepresentation of Financial Statements +3 more

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Parties

Securities and Futures Commission

Petitioner

Xu Jinpei (許金培)

1st Respondent

Hong Yinzhi (洪蔭治)

2nd Respondent

Wang Zhihong (王志洪)

3rd Respondent

Li Yuna (李宇娜)

4th Respondent

Hung Yvonne (洪綺婉)

5th Respondent

Chiu Sai Chuen Nicholas (趙世存)

6th Respondent

Chu Wai Wa Fangus (朱偉華)

7th Respondent

Ong King Keung (王競強)

8th Respondent

Procedural Posture

Section 214 Petition Under the Securities and Futures Ordinance / Summary Disposal Under the Carecraft Procedure (reasons for Decision)

Legal Issues

  1. 1 Whether the business or affairs of the listed company were conducted in a manner falling within s.214(1)(b),(c) and/or (d) of the SFO
  2. 2 Whether the 6th Respondent breached duties of care, skill and diligence and other fiduciary duties as a director/INED
  3. 3 Whether the agreed facts under the Carecraft procedure justify summary disposal and the making of disqualification and costs orders

Ratio Decidendi

On the basis of the admitted and agreed facts, the Court was satisfied that the Company’s consolidated bank balances were substantially overstated by omission and fabrication in subsidiary ledgers and supporting documents, that those overstatements fell within s.214(1)(b),(c) and (d) of the SFO, and that the 6th Respondent negligently breached his duties as an INED and Audit Committee member by failing to supervise, investigate and ensure adequate internal controls; accordingly a disqualification order for three years and payment of agreed costs was appropriate and proportionate given the gravity and admitted mitigating factors.

Court Disposition

Judgment by consent under Carecraft procedure: 6th Respondent disqualified from acting as a director or otherwise participating in management for 3 years and ordered to pay the Petitioner’s agreed costs

Orders

  • The 6th Respondent (Chiu Sai Chuen Nicholas) is prohibited without leave of the Court for a period of 3 years from (1) being, or continuing to be, a director, liquidator, receiver or manager of the property or business of any listed or unlisted corporation in Hong Kong including China Candy Holdings Limited or any...
  • The 6th Respondent must pay the costs of the Petitioner in these proceedings in the sum agreed between the parties.