SFC obtains disqualification orders between two to nine years against former directors and senior executive of National Agricultural Holdings Limited

The Securities and Futures Commission (SFC) has obtained disqualification orders in the Court of First Instance against a former financial manager, Ms Lu Ying, former executive directors, Mr Ren Hai and Mr Peng Guojiang, and a former independent non-executive director, Mr Ting Tit Cheung, of National Agricultural Holdings Limited (NAH) (Notes 1 and 2).

Lu was disqualified for nine years, Ren and Peng for seven years individually, and Ting for two years, from (i) being, or continuing to be, a director, liquidator, or receiver or manager of the property or business of any corporation in Hong Kong including NAH or any of its subsidiaries and affiliates and (ii) in any way, directly or indirectly, being concerned, or taking part, in the management of any corporation in Hong Kong. They were also ordered to pay the SFC’s costs in the proceedings (Notes 3 and 4).

The Court proceedings followed the SFC’s investigations which revealed that:

• NAH’s controlling shareholder, Parko (Hong Kong) Limited (Parko), had acquired 212,194,500 shares in NAH pursuant to a subscription agreement with NAH, but it failed to pay the consideration of approximately HK$676 million to NAH when the shares were allotted to it on 9 June 2015;

• under the instructions of NAH’s former chairman Mr Chen Li-Jun, Lu and others had transferred HK$384 million to a company between January and June 2015 purportedly to establish an investment fund for NAH. The money was used for other purposes unrelated to NAH and part of it was transferred to Parko;

• a sum of RMB1.85 billion, being the refund arising from two lapsed transactions which was deposited into NAH’s accounts in August 2017, was shortly transferred out of NAH through a series of dubious transactions for unknown purposes; and

• Chen had transferred HK$50 million from NAH to a company connected to him without justifiable reasons in 2015 and concealed it under the guise of NAH lending money to another company.

Chen was at all material times the central figure of the above misconduct. It is evident that Chen had intentionally breached his duties to NAH for Parko’s advantage and his personal benefit. However, Parko had become a defunct company and Chen, also a director of Parko, had passed away after the commencement of the proceedings. 

The orders were made after Lu, Ren, Peng and Ting admitted that they were in breach of their duties to NAH. The Court found that Lu, in her capacity as the financial manager of NAH, had assumed a substantial role in managing NAH’s financial affairs. She was involved in coordinating the payments of the questionable transactions. She knew or ought to have known about the misconduct.   

Ren and Peng, as executive directors of NAH, had allowed NAH’s affairs to be dominated by Chen and others for their personal advantage. Both of them neglected or omitted to identify or rectify the misconduct or breach of duties by Chen and the others. They also failed to raise concerns, queries or seek necessary information in relation to the significant and questionable transactions. As such, as executive directors, they were in breach of their duties to NAH. They were Parko’s directors themselves, but they had allowed Chen and the company to commit the misconduct against NAH. 

Ting, as an independent executive director, was also in breach of his duties to NAH by failing to exercise independent judgement and supervision. He failed to seek information or raise queries about these questionable transactions. As a member of the audit committee, he failed to take any active steps to understand or investigate the situation even after the auditor had raised concerns. He had also allowed NAH’s affairs to be dominated by Chen and neglected or omitted to identify or rectify the misconduct or breach of duties by Chen and the others.

On 23 June 2023, the SFC obtained disqualification orders against three other directors of NAH (Note 5).

End

Notes:

1. The SFC commenced proceedings under section 214 of the Securities and Futures Ordinance in January 2021. 

2. NAH’s shares were listed on the GEM Board of The Stock Exchange of Hong Kong Limited (SEHK) on 17 December 1999 and the Main Board of the SEHK on 29 August 2011. The listing of its shares was cancelled with effect from 22 November 2019.

3. Lu was the financial manager of NAH from 15 October 2013 to 31 December 2017. Ren and Peng were executive directors of NAH from 15 October 2013 to 22 February 2018, and from 15 October 2013 to 26 July 2018 respectively. Peng had also been a director of Parko since March 2014, and Ren became a director of Parko in July 2016. Ting was an independent executive director of NAH and a member of the audit committee from 18 December 2013 to 15 December 2016.

4. The judgement is available on the Judiciary’s website (Case No. HCMP 36/2021).

5. On 23 June 2023, the SFC obtained disqualification orders in the same proceedings against a former executive director of NAH, Mr Liu Yong for three years, and independent executive directors of NAH, Ms Kathy Chiu Kam Hing and Mr William Fan Chung Yue for two years respectively. Please see the SFC’s press release dated 23 June 2023.