Next probe on 'failure to protect investors'Top News | Jane Cheung 29 Jul 2021
Next Digital, founded by imprisoned pro-democracy media tycoon Jimmy Lai Chee-ying, will have its corporate governance investigated by an inspector appointed by Financial Secretary Paul Chan Mo-po.
Clement Chan Kam-wing, former president of the Hong Kong Institute of Certified Public Accountants, will inspect the management of Next Digital - suspended since June 17 - and submit a report in six months.
The Companies Ordinance was invoked to appoint an inspector to investigate a listed company for the first time since 1999, when it was used on Peregrine Investments Holdings a year after it collapsed.
Chan said it appears Next Digital has been "run in a manner unfairly prejudicial to the interests of its shareholders and creditors." He suspects the firm's officers tied to alleged fraud offenses and misconduct have used it to conduct unlawful activities, adding they could have breached their fiduciary duties.
"[They] failed to observe proper standards of care in the performance of their duties and the governance of the company has seriously fallen short of that expected of a listed company," he said.
"All circumstances have given rise to grave concern on whether there was serious mismanagement in particular its officers' involvement in alleged criminal offenses or misconduct and their failure to prevent this from happening."
Chan questioned whether the officers had taken reasonable and adequate measures to protect the interests of shareholders and creditors.
He cited as an example a notice issued in May, when Next Digital said it had sufficient cash reserves to support operations until September next year.
But when on June 17 then secretary for security John Lee Ka-chiu froze HK$18 million of assets at three subsidiaries, including Apple Daily, in a national security investigation, the newspaper announced termination of its publication on June 23 and printed its last edition on June 24.
Chan also said Next Digital only revealed last week that it repaid a HK$150 million loan from Lai in April - earlier than its scheduled repayment date - contributing to a plunge in the firm's cash reserves. He said he suspects the company intentionally swindled stockholders.
Chan said as a leading international financial and commercial center, Hong Kong attaches paramount importance to uphold integrity and reputation of the corporate sector and the corporate governance regime.
The financial secretary also said Clement Chan, a Securities and Futures Commission nonexecutive director, has a wealth of experience in public service.