SECURITIES AND FUTURES COMMISSION v. ZHENG DUNMU AND OTHERS

SECURITIES AND FUTURES COMMISSION v. ZHENG DUNMU AND OTHERS

The court found on the evidence that the 3rd respondent, as CFO and executive director, caused or allowed the Company to publish false or misleading placement announcements, procured publication of financial reports overstating cash by RMB251 million by providing and relying on fabricated bank records, and allowed and concealed the misappropriation of HK$163 million to the 1st respondent. Those acts constituted misconduct under s.214(1)(b),(c) and (d) SFO. It was just to make a 10‑year disqualification order and a compensation order requiring payment of HK$163,000,000 with interest, together with costs nisi.

Citation
[2024] HKCFI 928
Parties
Petitioner: Securities and Futures Commission; 1st Respondent: Zheng Dunmu; 2nd Respondent: Zheng Dunqian; 3rd Respondent: Chen Ruomao; 4th Respondent: Ye Deshan; 5th Respondent: Changgang Dunxin Enterprise Company Limited (in liquidation)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
28 March 2024
Case Number
HCMP1462/2019
Procedural Posture
SFO S.214 Petition (misconduct by Directors of a Listed Corporation) / Judgment
Outcome
Petition allowed against the 3rd respondent; relief granted as set out in orders
Legal Topics
Director Disqualification, Compensation Order, Misappropriation of Company Funds, Misfeasance, Misleading Disclosure, Overstatement of Financial Statements, Concealment of Misconduct
Source Language
EN
Securities Law Company Law Equity and Fiduciary Remedies Corporate Governance Civil Procedure (service) Director Disqualification Compensation Order Misappropriation of Company Funds +4 more

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Parties

Securities and Futures Commission

Petitioner

Zheng Dunmu

1st Respondent

Zheng Dunqian

2nd Respondent

Chen Ruomao

3rd Respondent

Ye Deshan

4th Respondent

Changgang Dunxin Enterprise Company Limited (in liquidation)

5th Respondent

Procedural Posture

SFO S.214 Petition (misconduct by Directors of a Listed Corporation) / Judgment

Legal Issues

  1. 1 Whether the conduct of the 3rd respondent falls within s.214(1)(b)-(d) of the SFO
  2. 2 Whether the Share and Bond Placement announcements were false or misleading
  3. 3 Whether the Group's cash balance was fraudulently overstated

Ratio Decidendi

The court found on the evidence that the 3rd respondent, as CFO and executive director, caused or allowed the Company to publish false or misleading placement announcements, procured publication of financial reports overstating cash by RMB251 million by providing and relying on fabricated bank records, and allowed and concealed the misappropriation of HK$163 million to the 1st respondent. Those acts constituted misconduct under s.214(1)(b),(c) and (d) SFO. It was just to make a 10‑year disqualification order and a compensation order requiring payment of HK$163,000,000 with interest, together with costs nisi.

Court Disposition

Petition allowed against the 3rd respondent; relief granted as set out in orders

Orders

  • Disqualification order: the 3rd respondent Chen Ruomao is disqualified from being a director for 10 years
  • Compensation order: the 3rd respondent to pay HK$163,000,000 to the Company with interest at HSBC prime lending rate plus 2% from the date of the Petition (12 September 2019) to the date of judgment (28 March 2024) and thereafter at judgment rate