香港联合交易所有限公司
(香港交易及结算所有限公司全资附属公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)
The Stock Exchange of Hong Kong Limited
CRITICISES:
(1) China Gas Industry Investment Holdings Co. Ltd. (Stock Code: 1940); and
IMPOSES A PREJUDICE TO INVESTORS’ INTERESTS STATEMENT against:
(2) Mr David T Chen, former chairman and executive director.
The statement made in respect of Mr Chen above is made in addition to a public censure against him. The Prejudice to Investors’ Interests Statement is a statement that, in the Exchange’s opinion, had Mr Chen remained on the board of directors of the Company, the retention of office by him would have been prejudicial to the interests of investors.
The Company used a substantial proportion of its funds shortly before and after listing to provide three unsecured loans and subscribe for a loan note. The unsecured loans, representing more than 36 per cent of the expected net listing proceeds, were granted at an interest rate that was much lower than the effective interest rates being paid by the Company to its own lenders. There was no disclosure of the transactions, or their potential risks, in the prospectus. As a result, the prospectus was misleading. The Company subsequently made a full loss allowance of RMB118 million and RMB66.4 million on the loan and loan note receivables respectively.
Mr Chen entered into all four transactions on the Company’s behalf without seeking the approval of the board of directors and without consulting the Company’s sponsor and compliance adviser. His entry into the transactions was also in breach of the Company’s internal control policy. Mr Chen was unable to explain the commercial rationale for the loans.
Mr Chen later sought the board’s endorsement of a proposed put option arrangement, under which the Company could be obliged to buy its own shares from a vendor. Mr Chen neither knew, nor had performed any background or credit assessment of, the proposed vendor.
Mr Chen failed to discharge his directors’ duties and/or obligations in approving the four transactions and in proposing the draft put option agreement. He also failed to protect the Company’s interest and to use his best endeavours to procure the Company’s Listing Rule compliance in respect of the transactions and/or their disclosure.
The Company and Mr Chen accepted their respective breaches and reached a settlement with the Listing Division in this case.
Key messages:
A company being listed is required to provide sufficient and accurate information to enable investors to make an informed assessment of the issuer and of the securities for which listing is sought. Applicants for listing and their directors must ensure that disclosures in the prospectus, including those relating to the use of funds, financial information and risks, are accurate and complete and not misleading.
Directors must exercise skill, care and diligence in proposing or entering transactions. Appropriate due diligence and risk assessment must be conducted.
Directors must also ensure that significant transactions and risks are brought to the attention of the board.
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The Statements of Disciplinary Action in respect of
the Company and
Mr Chen are available on the HKEX website.
Ends