Hong Kong SFC Publicly Criticises Two Individuals for Breaching Takeovers Code

The Securities and Futures Commission (SFC) has publicly criticised Gao Yunhong and Feng Xuelian for breaching the no frustrating action rules under the Takeovers Code.

An offer period commenced for Steering Holdings Limited on 13 May 2021 when an announcement was published by Masterveyor Holdings Limited. Between 27 May 2021 and 1 June 2021, a wholly-owned subsidiary of Steering disposed of certain listed securities held by it. Given that the disposals when aggregated were a discloseable transaction under the Listing Rules carried out during an offer period, they constituted a frustrating action which was subject to the requirements of the Takeovers Code.

The approval of Steering's shareholders was not obtained nor was a waiver of the requirement to obtain shareholders' approval sought from the Executive. This was a clear breach of the Takeovers Code requirements.

Gao and Feng, the two directors of Steering who were substantially involved in the disposals, accepted that they breached the Takeovers Code and agreed to the disciplinary action against them. They admitted that the breaches arose as a result of their oversight and misunderstanding of the Takeovers Code requirements.

The SFC reminds practitioners and parties who wish to take advantage of the securities markets in Hong Kong that they should conduct themselves in accordance with the Codes on Takeovers and Mergers and Share Buy-backs (the Codes), regardless of the position that they find themselves in. This includes seeking professional advice as and when needed. Professional advisers should ensure that their clients understand and abide by the Codes. If there is any doubt about the application of the Codes, the Executive should be consulted at the earliest opportunity.