The Securities and Futures Commission (SFC) of Hong Kong has commenced legal proceedings under section 214 of the Securities and Futures Ordinance (SFO) in the Court of First Instance to seek a share repurchase order to protect the interests of independent minority shareholders of LET Group Holdings Limited and Summit Ascent Holdings Limited as a result of alleged misconduct of Mr Lo Kai Bong, chairman, executive director and controlling shareholder of both companies.
The share repurchase order would require Lo, LET and/or Summit Ascent to make an offer to purchase shares from both companies’ minority shareholders independent of Lo at a price and in a manner to be determined by the Court.
The alleged misconduct of Lo has resulted in the trading suspension of the shares of LET and Summit Ascent. Since it is uncertain as to whether and when the shares would be able to resume trading, the share repurchase order would provide an exit for independent minority shareholders.
As part of the legal proceedings, the SFC is also seeking a disqualification order against Lo for his misconduct towards members of LET and Summit Ascent.
The SFC’s investigation found that Lo deliberately disregarded the applicable Listing Rules and the requirements under the Code on Takeovers and Mergers (Takeovers Code) and caused both LET and Summit Ascent to enter into agreements to dispose of their assets in Russia in early 2024. The planned disposal of assets in Russia by both companies would have been considered a very substantial disposal under the Listing Rules.
In particular, Lo:
- disregarded legal advice regarding non-compliance with the Listing Rules and the disapproval by the other directors of LET and Summit Ascent, who subsequently resigned as a result of the planned disposal of assets;
- caused LET and Summit Ascent to announce that the planned disposal of assets would proceed, without disclosing the non-compliance issues to the shareholders of both companies; and
- disregarded the regulatory concerns raised by the SFC and the SEHK regarding the non-compliance issues and continued to procure the two companies to proceed with the planned disposal of assets, resulting in the trading suspension of the shares of both companies under section 8(1) of the Securities and Futures (Stock Market Listing).
Although the planned disposal of assets was terminated, the SFC alleges that Lo failed to, among other things, disclose all relevant material information to LET and Summit Ascent and their shareholders; apply reasonable skill, care and diligence in the performance of his duties as director of both companies; and ensure their full compliance with the Listing Rules and the Takeovers Code.
