The Securities and Futures Commission has obtained disqualification orders in the Court of First Instance against four former directors of China Candy, a former GEM-listed company, with the longest disqualification order lasting 33 months.
The orders were issued due to their negligent discharge of duties, failure to detect material overstatements in the company's financial records, and improper performance of their responsibilities as directors.
The SFC noted that these legal proceedings against the four former directors are part of the SFC's broader legal action against former directors and the former chief financial officer of China Candy.
The SFC identified the four former directors of China Candy as Li Yuna and Yvonne Hung, both former executive directors and chairpersons, and former independent non-executive directors Fangus Chu Wai-wa and Wong King-keung.
According to the court orders, all four are prohibited from acting as directors, liquidators, receivers, or managers of any corporation in Hong Kong, or from participating in the management of any corporation in Hong Kong.
Li and Hung received disqualification periods of 33 months and 24 months, respectively, while Chu and Wong each received 12-month disqualifications. They were also ordered to pay for the SFC's legal proceedings fee.
The SFC stated that its investigation revealed that the cash and bank balances disclosed in China Candy's 2016 interim report and 2016 annual report overstated its cash and bank balance by 87 percent and 97 percent, respectively. The SFC also found that China Candy had fabricated bank and accounting records to conceal the overstatements, leading to the aforementioned legal action.
Furthermore, the four former directors admitted that they relied on external professionals to identify and report potential red flags.
Specifically, internal control review reports of China Candy prepared by external professionals in 2015 and 2016 identified several issues, including discrepancies in cash counts, lack of petty cash records, and inconsistent reporting methods for monthly management accounts and bank reconciliations.
However, the four former directors failed to properly review these issues and did not verify whether the promised remedial measures had been implemented. By failing to take relevant action, they abdicated their responsibility to independently identify and assess the matters concerning overstatements and fabricated records.
Notably, the SFC stated that Xu Jinpei, former chairman and executive director of China Candy, Hong Yinzhi, former chief executive officer and executive director, and Wang Zhihong, former chief financial controller, were the originators and perpetrators of the overstatements and fabricated records during the critical period, or at the very least knowingly permitted or acquiesced to such matters, or turned a blind eye to them.
The court hearing in the legal proceedings against these three individuals concluded in March 2026, with the case pending judgment.
𝗗𝗼𝘄𝗻𝗹𝗼𝗮𝗱 𝗧𝗵𝗲 𝗦𝘁𝗮𝗻𝗱𝗮𝗿𝗱 𝗔𝗽𝗽 ↓
