The Hong Kong Securities and Futures Commission (SFC) has obtained court permission to go ahead and implement a compensation deal that that is the first of its kind and which will see HK$192m paid by former senior directors of Combest Holdings Limited to shareholders.

Having obtained orders from the Court of First Instance for the compensation in the form of a special dividend to public shareholders of the now delisted Combest, the SFC has also obtained disqualification of shadow director Ng Kwok Fai, and two former executive directors, Liu Tin Lap and Lee Man To.

The court order was granted following a first-of-its-kind settlement secured by the SFC for the trio to pay about HK$192m to an administrator jointly appointed by the SFC and Combest for redistribution as special dividends to independent public shareholders.

The independent public shareholders will receive $0.066 per share, which is 2.75 times higher than the last closing price Combest’s shares before suspension on 29 May 2019.

Ng was disqualified for 12 years, and Liu and Lee for eight years respectively, from being a director, liquidator, receiver or manager, and being involved in the management of any corporation. They were also ordered to pay the SFC’s costs in the proceedings.

Julia Leung, the Chief Executive Officer of the SFC, said: "This court decision underscores the SFC’s power to hold de facto controllers of listed companies accountable for their misconducts, ensuring they face repercussions for their wrongdoings. The provision of direct compensation to affected shareholders marks a pioneering step, demonstrating the SFC’s unwavering devotion to exploring all avenues to achieve the most fair and efficient resolutions to protect the investing public."

The SFC’s investigation revealed that Liu and Lee acted upon Ng’s directions and instructions to operate and manage the affairs of Combest. Together, the trio orchestrated the acquisition of two subsidiary groups that were substantially overvalued by HK$229m in 2016 and 2017, as well as payments of fictitious loan interests and fees totalling HK$64 million to entities related to Ng, and grossly inflated Combest’s revenue artificially generated by entities related to Ng across various accounting periods between 2016 and 2019.

The Court found that:

  • The misconduct and breaches of duty established against Ng fall within the top bracket in terms of seriousness.
  • Liu and Lee actively and knowingly assisted Ng and hence a disqualification period falling towards the top end of the middle bracket is appropriate.
  • The compensation scheme is in the public interest as it would ensure independent public shareholders of Combest are compensated.

Bruno Arboit of Kroll (HK) Limited, who has been jointly appointed by the SFC and Combest as the administrator, will implement the compensation scheme and administer the distribution of the special dividends to Combest’s independent public shareholders as at the date when the funds are deposited in the administrator’s bank account. The administrator will contact the relevant shareholders of Combest in due course. Combest’s shareholders may contact the administrator at its email [email protected] or its hotline at (852) 2281 0108 if they have any queries.