We continue our investigation into the UK joint venture, following a "clarification" announcement late on Christmas Eve.

China First Capital (1269): part 2
13 January 2019

In our article of 7-Oct-2018, we raised questions about KSI Education Ltd (KSIE), a 49:51 joint venture between China First Capital Group Ltd (CFC, 1269) and a BVI company, Bonus First Holdings Ltd (BF), the owner of which was not (and still hasn't been) disclosed. The transaction was announced on 15-Jun-2018. At 19:24 on Christmas Eve, 24-Dec-2018, when nobody was paying much attention (the market having closed at 12:00), CFC slipped out a "supplemental and clarification" announcement which was clearly in response to the issues we raised.

We noted in the article that BF had only partly paid for its shares in KSIE, which contravened the articles of association of KSIE, which required all shares to be paid for in full. As if by magic, CFC now claims that on 6-Jul-2018, the completion date of the Investment Agreement, KSIE adopted new articles of association which removed the prohibition on issuing partly-paid shares, so hey presto, there was no contravention. The funny thing is that KSIE did not get around to filing the resolution that changed the articles with UK Companies House (UKCH) until 24-Oct-2018. Not only that, but on 14-Aug-2018, KSEI filed a resolution on other changes to the articles of association made on 12-Jun-2018. If they had really made further changes on 6-Jul-2018 then they could have included them in the August filing 39 days later. So it appears likely that KSIE backdated the resolution to address the issue raised in our article. Section 26 of the UK Companies Act requires amended articles of association to be submitted to UKCH within 15 days, so in both filings, KSIE was in breach of that requirement.

CFC states that "due to an unexpected obstacle of [KSIE] in receiving remittance", BF had only settled GBP16.1m by the time of completion on 6-Jul-2018, and that the description in the first announcement that the total amount (GBP30.6m) would be paid on completion was misstated "due to an inadvertent mistake in summarising the terms of the Investment Agreement" and that in fact BF had "30 Business Days" to come up with the money - which begs the question of why BF sent any money at all on completion. The clarification announcement states that by Christmas Eve, BF has paid in full, although CFC doesn't say when that happened.

We also noted in the article that KSEI had 4 directors, not 3 as claimed in the June announcement. CFC now claims that Mr Wilson Sea (Mr Sea) and Ms Li Dan (Ms Li) resigned from KSIE on 11-Jun-2018. How strange then that KSIE didn't get around to filing the termination forms with UKCH until 22-Oct-2018, over 4 months later. Indeed, the notices of their appointment were filed on 9-Aug-2018, over a month after they purportedly resigned. The late filing of both is in breach of Section 167 of the UK Companies Act, which requires such filings to be made within 14 days. They also claim that Mr Chen Xiaowei (Mr Chen) was appointed as director on completion, 6-Jul-2018, to represent BF. Again, that filing was not made until 22-Oct-2018, in breach of Section 167.

The clarification announcement states that to replace Mr Sea and Ms Li, Ms Sabrina Cheung Ting Wang (Ms Cheung), CFC's "chief representative" in the UK, was appointed as a director of KSIE on 11-Jun-2018 (before the JV was signed) because KSIE understood that the bank account opening process could be accelerated if directors are British citizens. Ms Cheung is said to have "extensive working experience in the education industry and has a well-established network with reputable education institutes in the United Kingdom".

Webb-site has dug a little deeper into Ms Cheung's background. A person named "Ting Wang Cheung", also born in Apr-1977, was a director or secretary of two now-dissolved companies in the UK between 2004 and 2008. Her address then, in West End Road, Frampton, Boston, Lincolnshire, was the same as another director/company secretary of those two companies, Albert Cheung Yin Tak (Mr Cheung), who is almost 18 years older than her. The English marriage index records a marriage in 2001 in Boston, Lincolnshire between an "Albert Y T Cheung" and a "Ting Wang". They are probably the same as Mr Cheung and Ms Cheung respectively. We don't know whether the two are still married, but she does know where to get a good meal. Mr Cheung runs "Albert's Hong Kong Restaurant" (street view) in Boston, and he was declared bankrupt on 11-Oct-2017 on petition of the UK tax authorities. The order was annulled on 12-Apr-2018 after the debts were cleared.

CFC has still not disclosed who owns BF. KSIE has not made any change to its UK filing of "Persons with significant control" (PSC) since incorporation on 9-Oct-2017, before the JV was set up, even though BF now purportedly owns 51% of KSIE. Ms Yao Zhen, who was the first director and subscriber of 1 share in KSIE, is still listed as the only PSC. We know nothing about Mr Chen, BF's representative. CFC did not mention Ms Yao's other companies or the reasons for them: the similarly-named KSI EDU LTD, and KSI GLOBAL LTD.

Meanwhile, if you're feeling hungry:

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