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

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.