Former directors of First China financial services group ordered to compensate the company
SFC obtains court orders against current and former directors of First China to compensate the company RMB18.69 million
The Court of First Instance has ordered three current and former directors of First China Financial Network Holdings Ltd (First China), to pay a total sum of RMB18,692,000 with interest as compensation to First China following findings of misconduct (Notes 1 & 2).
The three directors are First China’s current chairman, Mr Wang Wenming, its current chief executive officer Mr Lee Yiu Sun and former chairman Mr Richard Yin Yingneng.
Following a contested trial, the court found that Wang, Lee and Yin breached their duties to First China when they agreed to pay RMB18,692,000 special dividend to Fame Treasure Ltd.
First China had earlier purchased GoHi Holdings Ltd (GoHi) and issued an announcement to the market on 16 December 2008 stating that the payment was part of a mutual understanding and agreement with Fame Treasure Ltd at the time of the acquisition of GoHi.
The Securities and Futures Commission (SFC) argued and the court found that this was not the case and there had never been any such mutual understanding or arrangement (Note 3).
The court found that Wang, Lee and Yin caused First China to make a payment that First China was not required to make at all and ordered them to repay this amount to First China.
A further hearing will be scheduled to determine whether disqualification orders should be made against Wang, Lee and Yin (Note 4).
During the trial, it was revealed that a written resolution was recently passed by a non-executive director and four independent non-executive directors of First China to provide an indemnity to Wang and Lee for all professional and legal fees incurred by them concerning the defence of the SFC’s petition and all legal costs claimed by the SFC as a result.
The court found the indemnity was plainly inappropriate and a poor reflection on the company’s corporate governance. Consequently, Wang and Lee have either repaid or are in the course of repaying the legal costs First China paid on their behalf.
“Listed company directors have a duty to safeguard shareholders’ funds. This means they should only be used for proper company purposes and the payment to Fame Treasure Ltd was clearly not for a proper purpose,” the SFC’s Executive Director of Enforcement, Mr Mark Steward said.
“The SFC will continue to hold listed company directors to account and seek orders to remediate corporate losses where appropriate,” he added.
Source: SFC
