SFC obtains compensation and disqualification orders against former directors of Arta TechFin Corporation Limited

The Securities and Futures Commission (SFC) has obtained an order from the Court of First Instance requiring Mr Andrew Liu, a former non-executive director of Arta TechFin Corporation Limited (Arta TechFin) (known as Freeman Financial Corporation Limited at the material time), and Mr Quincy Hui Kwong Hei, former managing director of Arta TechFin, to compensate the company $57.5 million over the financial loss they caused from its acquisition and disposal of a stake in Liu’s Holdings Limited (Liu’s Holdings) (Notes 1 and 2).

Liu and Hui were also disqualified from acting as a director or in any way being concerned with or taking part in the management of Arta TechFin and any other corporation, without leave of the Court, for eight years and six years respectively.

Notably, the Court found that Liu’s misconduct was the most serious whilst Hui played a major part in the above-mentioned transaction.

Seven other former executive directors and independent non-executive directors of the Arta TechFin – namely, Mr Lo Kan Sun, Ms Sue Au Shuk Yee, Mr Philip Suen Yick Lun, Mr Scott Allen Phillips, Mr Agustin V Que, Mr Gary Drew Douglas and Mr Peter Temple Whitelam – were disqualified by the Court for periods ranging from one to two years. They, together with Liu and Hui, were ordered to pay the SFC the costs of the legal proceedings.

The SFC commenced its legal proceedings under section 214 of the Securities and Futures Ordinance in October 2016, seeking court orders against them for breaching their directors’ duties related to the acquisition of a stake in Liu’s Holdings and its subsequent disposal within a few months in 2011, resulting in substantial losses for Arta TechFin (Note 2).

The compensation and disqualification orders were made after the Court determined that Liu, Hui, along with the seven former executive directors and independent non-executive directors, were responsible for Arta TechFin’s business and affairs being conducted in an oppressive manner, involving defalcation, misfeasance or other misconduct against the company or its members, or unfairly prejudicial. Regardless of whether they were executive or non-executive directors, they bore the same legal responsibility for managing Arta TechFin’s business, including the responsibility to scrutinise proposals that could directly impact the interests of shareholders (Notes 3 and 4).

It was further held that the lengths of the disqualification periods properly reflect each of their level of involvement and the severity of their misconduct.

The SFC’s Executive Director of Enforcement, Mr Michael Duignan, said: “We welcome the judgement. This judgment sends a clear and unequivocal message that directors, whether executive or non-executive or independent non-executive, who neglect their fiduciary duties or fail to protect the company’s interests will be held fully accountable. The SFC stands resolute in its commitment to enforcing the highest standard of corporate governance and individual accountability. We will not hesitate to take decisive action to protect investors, safeguard company assets, and uphold the integrity of our markets.”

End

Notes:

1. Arta TechFin Corporation Limited (stock code: 279) was known as Freeman Financial Corporation Limited at the material time until October 2016, when its name was changed to Freeman FinTech Corporation Limited before adopting the current name in October 2021.  

2. Please refer to the SFC’s press release dated 7 October 2016.

3. The orders were made following the Court’s approval that the proceedings could be disposed by way of Carecraft procedure. In 2023, the SFC and the respondents submitted agreed statement of facts upon which the Court determined the appropriate orders to be made. The SFC’s claim against an independent non-executive director, Mr Roger Thomas Best, was withdrawn.

4. The judgement is available on the Judiciary’s website (case number: HCMP2653/2016).