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SFC seeks court orders to disqualify former directors and ex-chief financial controller of China Candy Holdings Limited

Issue date: 2023-04-20 16:39:14

The Securities and Futures Commission (SFC) has commenced legal proceedings in the Court of First Instance (CFI) to seek disqualification orders against seven former members of the board of directors of China Candy Holdings Limited (China Candy) and the company’s former chief financial controller (Note 1).

The eight respondents named in the SFC’s legal proceedings under section 214 of the Securities and Futures Ordinance (SFO) are: Mr Xu Jinpei, former chairman and executive director; Ms Hong Yinzhi, former chief executive officer and executive director; Ms Li Yuna and Ms Yvonne Hung, former executive directors; Mr Nicholas Chiu Sai Chuen, Mr Fangus Chu Wai Wa and Mr Ong King Keung, former independent non-executive directors; and Mr Wang Zhihong, former chief financial controller (Notes 2 & 3).

The SFC’s legal action follows an investigation which found that China Candy’s 2016 interim report and 2016 annual report had falsely and misleadingly portrayed the company’s financial strength by overstating the cash and bank balances by 87% and 97% as of 30 June 2016 and 31 December 2016 respectively.  To this end, falsified bank and accounting records were created to cover up the overstatement of the company’s cash and bank balances (Fraudulent Scheme).

The SFC alleges that Xu, Hong and Wang were, at the material time, the instigators and perpetrators of, or at least knowingly permitted, acquiesced or turned a blind eye to the Fraudulent Scheme.  As for the remaining former executive and independent non-executive directors, the SFC alleged that they were negligent and/or in breach of their duties owed to China Candy including, inter alia, duties of care, skill and diligence and duties to act in the best interest of the company.

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Notes:

1. China Candy, whose subsidiaries were principally engaged in the manufacturing and sales of candies products, was listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited on 11 November 2015 and delisted on 31 December 2019.
2. Since Xu, Hong and Wang resided in the Mainland when the legal proceedings began, the SFC had to obtain leave from the CFI to serve the petition relating to the proceedings to the trio in the Mainland and the process was successfully completed recently.
3. Under section 214 of the SFO, the court may, among other things, make orders to disqualify a person from being a director or being involved, directly or indirectly, in the management of any corporation for a period of up to 15 years, if the person is found to be wholly or partly responsible for the company’s affairs having been conducted in a manner, amongst other conduct, involving defalcation, fraud, misfeasance or other misconduct towards the company or its members.

News captured as of:2023-04-20 17:46:00

Source: SFC