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SFC sanctions Chu Hing Tsung for breaches of the Takeovers Code

Issue date: 2022-01-25 16:23:39

The Securities and Futures Commission (SFC) publicly censured and imposed a 12-month cold-shoulder order (Note 1) against Chu Hing Tsung (HT Chu) for breaching the mandatory general offer obligation under Rule 26.1 of the Takeovers Code (Note 2).

Rong De Investments Limited has been the controlling shareholder of Zhuguang Holdings Group Company Limited since its listing in 2009 when it was owned by Liao Tengjia and Chu Muk Chi (Note 3).

In 2012, HT Chu acquired shares in Rong De and, together with his brother Chu Muk Chi, obtained statutory control of Rong De as a result of a discloseable and connected transaction. HT Chu’s acquisition of shares in Rong De triggered a mandatory general offer under Note 8 to Rule 26.1 of the Takeovers Code, but no general offer was made at that time.

While the parties had sought legal advice for the 2012 transaction, they were not advised of the implications under the Takeovers Code. HT Chu accepted that he had breached Rule 26.1 of the Takeovers Code and agreed to the disciplinary action against him.

Parties who wish to take advantage of the securities markets in Hong Kong should conduct themselves in accordance with the Codes (Note 4). This includes seeking professional advice as needed. Professional advisers should ensure that their clients understand and abide by the Codes. If there is any doubt about the application of the Codes, the Executive (Note 5) should be consulted at the earliest opportunity.

The Executive Statement can be found in the “Regulatory functions – Corporates – Takeovers and mergers – Decisions and statements – Executive decisions and statements” section of the SFC’s website.

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Notes:

1. HT Chu (also known as Zhu Qing Yi) will be denied direct or indirect access to the Hong Kong securities market for a period of 12 months from 25 January 2022 to 24 January 2023.
2. The Code on Takeovers and Mergers.
3. Liao Tengjia owned 60% of Rong De and Chu Muk Chi owned 40%.
4. The Codes on Takeovers and Mergers and Share Buy-backs.
5. The Executive Director of the SFC’s Corporate Finance Division or his or her delegate.

Source: SFC