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SFC publicly criticises Cheung Chi Shing for breach of the Takeovers Code

Issue date: 2023-03-28 18:07:27

The Securities and Futures Commission (SFC) has publicly criticised Cheung Chi Shing for his failure to obtain regulatory approval before triggering a mandatory general offer obligation, in breach of the Takeovers Code (Note 1).

Cheung acquired 30,623,172 shares or about 4.32% of the shareholding interest in Styland Holdings Limited (Note 2) on 5 July 2022. Upon the completion of these acquisitions, Cheung and his concert parties’ aggregate shareholding in Styland increased from 27.52% to 31.84%, triggering an obligation to make mandatory conditional general offers for all of Styland’s shares and outstanding convertible bonds (Note 3).

Four subsidiaries of Styland are licensed corporations under the Securities and Futures Ordinance (SFO) (Note 4). In the event the mandatory general offer became unconditional, Cheung and his concert parties would hold more than 35% of Styland’s shares and would be new substantial shareholders of the four licensed corporations. This required the SFC’s approval, which was not obtained (Note 5).  

Whilst Cheung and his concert parties have taken remedial measures to make the general offers (Note 6), Cheung accepted that he had not obtained the required approval before triggering an obligation (Note 7). Cheung submitted that the breach was unintentional and agreed to the disciplinary action taken against him.

The Executive (Note 8) expects persons who are actively engaged in the securities market to comply with the Codes (Note 9). This includes seeking professional advice as and when needed. If there is any doubt about the application of the Codes, the Executive 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. The Code on Takeovers and Mergers.
2. The shares of Styland Holdings Limited (stock code: 211), a Hong Kong-based investment holding company principally engaged in financial businesses, listed on the Main Board of the Stock Exchange of Hong Kong Limited in 1991.
3. Pursuant to Rule 26.1 and Rule 13.5 of the Takeovers Code.
4. The four subsidiaries are Ever-Long Futures Limited, Ever-Long Research Limited, Ever-Long Securities Company Limited and Ever-Long Capital Management Limited.
5. A person shall not become and continue to be a substantial shareholder of a licensed corporation without first being approved by the SFC under section 132 of the SFO.
6. To comply with the relevant requirements under the Takeovers Code and the SFO, Cheung and his wife transferred their entire shareholding interests in Styland to their three children. Cheung’s children and Kevonia Family Limited (Offeror) (a company held by Cheung’s children in equal shares) applied for, and were granted, the required approval. On 16 December 2022, the Offeror announced that it would make the Offers in accordance with Rule 26.1 of the Takeovers Code. The Offers were made by the Offeror on 20 January 2023, became unconditional on 3 February 2023 and closed on 17 February 2023.
7. Note 4 to Rule 26.2 of the Takeovers Code requires an offeror to obtain all relevant regulatory approvals before triggering an obligation to make a general offer.
8. The Executive refers to the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director.
9. The Codes on Takeovers and Mergers and Share Buy-backs.

Source: SFC