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SFC obtains court order to disqualify former independent non-executive director of China Candy Holdings Limited for three years

Issue date: 2023-12-12 16:27:04

The Securities and Futures Commission (SFC) has obtained a disqualification order in the Court of First Instance against a former independent non-executive director of China Candy Holdings Limited (China Candy), Mr Nicholas Chiu Sai Chuen (Notes 1 & 2).

Chiu was disqualified from being a director and being involved in the management of any listed or unlisted corporation in Hong Kong, without the leave of the court, for a period of three years.  He was also ordered to pay the SFC’s costs in the proceedings (Notes 3 & 4).

The SFC’s investigation found that China Candy’s financial strength was falsely and misleadingly portrayed in the company’s interim and annual reports for 2016.  In particular, the company’s cash and bank balances were overstated by 87% and 97% as of 30 June 2016 and 31 December 2016 respectively. 

The SFC alleged that China Candy’s former Chairman, Chief Executive Officer and Chief Financial Officer were involved in and/or had knowledge of the fabrication of bank and accounting records to cover up the overstatements, whereas other directors including Chiu had acted negligently in the matter.

The disqualification order was made after Chiu admitted that he failed to uncover the overstatements and acted negligently in discharging his duties as director.  He also admitted that he did not pay attention to potential red flags in China Candy’s treasury, cash management and financial reporting functions identified by an internal control consultant engaged by the company.  He also accepted that as an independent non-executive director and audit committee member, he ought to be in a position but failed to monitor, inquire into and/or verify the financial position of the company.

Although Chiu was not involved in running China Candy’s day-to-day business, his negligence caused substantial harm and prejudice to shareholders and denied their access to information as to the company’s true financial position.  The duration of Chiu’s disqualification was to reflect the gravity of his misconduct.

The SFC’s proceedings against other former senior management of China Candy are ongoing.

End

Notes:

1. China Candy was listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (SEHK) on 11 November 2015 until its listing status was cancelled by SEHK with effect from 31 December 2019.  Chiu was an independent non-executive director of China Candy from 26 October 2015 to 31 December 2019.
2. The legal proceedings were commenced under section 214 of the Securities and Futures Ordinance to seek disqualification orders against seven former directors of China Candy and China Candy’s former chief financial controller.  Please see the SFC’s press release dated 20 April 2023.
3. The order was made following the Court’s approval that the proceedings against Chiu could be disposed of by way of Carecraft procedure where the Court determines the appropriate orders to be made based on an agreed statement of facts and agreed proposed orders.
4. The judgment is available on the Judiciary’s website (Court Reference: HCMP 572/2022).

Source: SFC