The Securities and Futures Commission (SFC) has obtained disqualification orders in the Court of First Instance against three former directors of EganaGoldpfeil (Holdings) Ltd (EHL) for their roles in the company’s misapplication of funds (Notes 1 to 4).
The three former directors, namely, Mr David Wong Wai Kwong, Mr Peter Lee Ka Yue, and Mr Chik Ho Yin, were disqualified from being a director or taking part in the management of any corporation in Hong Kong, without leave of the Court, for a period of nine years, six years and six years respectively, effective from 7 May 2020.
The Court found that the three former directors had approved transactions and signed cheques giving rise to the company’s doubtful receivables amounting to about $2.55 billion, including payments to at least seven debtors which were in fact under the control of Wong and the underlying transactions for the payments were in fact not genuine commercial transactions. They failed to carry out proper inquiries and perform appropriate due diligence before causing or permitting EHL to enter into the transactions and make the payments.
The SFC also sought compensation orders against the three former directors for a payment of $622 million to EHL, an amount equivalent to EHL’s payment of $622 million to Peninsula International Ltd, a company owned by the family of the EHL’s then chairman, to fund its purchase of some of EHL’s shares.
In analysing the power of the Court under section 214 of the SFO, the Court accepted that a compensation order can, in an appropriate case, be made irrespective of whether a respondent has received any financial benefits. The Court, however, declined to grant the compensation order being sought in this case, and considered it should remain with the liquidators of EHL to assess the efficacy as to whether it would be beneficial to bring proceedings in the name of EHL against any party (Note 5).
- EHL was listed on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK) on 25 June 1993 and 4 January 2012.
- Under section 214 of the Securities and Futures Ordinance (SFO), the Court of First Instance may make orders disqualifying a person from being a company director or being involved, directly or indirectly, in the management of any corporation for up to 15 years, if the person is found to be wholly or partly responsible for the company’s affairs having been conducted in a manner involving defalcation, fraud or other misconduct, resulting in its members or any part of its members not having been given all the information with respect to its business or affairs that they might reasonably expect, or unfairly prejudicial to its members.
- Please also see the SFC’s previous press release dated 1 August 2011. A summary of the SFC’s petition can be found on the SFC website (www.sfc.hk).
- The judgment is available on the Judiciary’s website https://www.judiciary.hk/en/home/ (Court Reference: HCMP 1227/2011).
- Under section 214(2)(e) of the SFO, the Court has the power to 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 or by the corporation, or otherwise.