SFC obtains 3-year DQ orders against former CEO and ED of Long Success (delisted)
SFC obtains disqualification orders against former senior executives of Long Success International (Holdings) Limited
Issue date: 2021-03-22 16:42:12
The Securities and Futures Commission (SFC) has obtained disqualification orders in the Court of First Instance against the former chief executive officer and executive director of Long Success International (Holdings) Limited (Long Success), Mr Hu Dongguang, and former executive director, Mr Guo Wanda, in the proceedings commenced by the SFC against 13 former directors of the company (Notes 1 to 6).
Hu and Guo were each disqualified from being a director or being involved, directly or indirectly, in the management of any corporation in Hong Kong including Long Success or any of its subsidiaries and affiliates, without the leave of the court, for a period of three years, effective from 11 March 2021.
The orders were made by The Honourable Mr Justice Coleman after they admitted that they were in breach of their fiduciary duties and common law duties to act in the interest of Long Success and/or to exercise due and reasonable skill, care and diligence in the course of acting as directors of Long Success.
The SFC’s investigation found that following Long Success’s acquisition of a 51% equity interest in Jining Gangning Paper Co, Ltd for HK$190 million in 2009, the latter failed to achieve the requisite profit amount in 2010 and 2011 under the terms of the acquisition, and as a consequence, the seller owed Long Success payment for the shortfall under the profit guarantee.
Former chairman and executive director of Long Success, Mr Wong Kam Leong, on behalf of Long Success, signed three confirmation letters with the seller between March 2011 and March 2012, agreeing, amongst other things, to defer the seller’s payment under the profit guarantee.
Wong signed another confirmation letter on behalf of Long Success in June 2012, whereby it was agreed that Long Success would forfeit the profit guarantee amount of about HK$30.1 million owed by the seller. This confirmation letter was not approved by the board of directors of Long Success.
Specifically, Hu and Guo admitted that they had allowed Wong to exercise domination and control of the affairs of the company and its board of directors for his personal advantage or other ulterior purposes, and that they neglected or omitted to exercise their duties as directors of Long Success by:
- approving a confirmation letter in March 2011 without making any or any sufficient enquiries or requesting further information about the confirmation letter which was prejudicial and of no discernible benefit to Long Success; and
- failing to monitor, make enquiries or follow up with the profit guarantee during the period from March 2011 to June 2012.
The SFC’s legal proceedings against other former directors of Long Success are ongoing.
- Long Success was listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (SEHK) since 17 August 2000 until its listing status was cancelled by the SEHK with effect from 19 October 2016. The company was principally engaged in paper manufacturing, biodegradable materials manufacturing, gaming and money lending services at the material time. Hu was an executive director and chief executive officer of Long Success from 18 January 2010 to 28 February 2013. Guo was an executive director from 1 May 2010 to 27 September 2012.
- The SFC commenced proceedings under section 214 of the Securities and Futures Ordinance (SFO) against 13 former directors of Long Success in May 2018 seeking orders that these former directors be disqualified from being directors or being involved in the management of any listed or unlisted corporation in Hong Kong.
- Under section 214 of the SFO, the court may make an order disqualifying a person from being a 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 a corporation’s business or affairs having been conducted in a manner, among other things, involving defalcation, fraud, misfeasance or other misconduct towards it or its members; 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 or any part of its members.
- The SFC previously obtained disqualification orders in the Court of First Instance against five former directors of Long Success in April 2020. Please see the SFC’s press release dated 27 April 2020.
- The orders were made following the Court’s approval that the proceedings be disposed of by way of a summary procedure which involved the submission of agreed statements of facts by the parties.
- The judgment is available on the Judiciary’s website (Court Reference: HCMP667/2018).
- Long Success International (Holdings) Limited
- MEGA BRIGHT INVESTMENT DEVELOPMENT LIMITED 宏輝投資發展有限公司
- STAR GRACE INTERNATIONAL LIMITED (d2014-04-04) 星譽國際有限公司