Warderly ex-directors get 28 days to make case against ban

PUBLISHED : Saturday, 07 November, 2009, 12:00am
UPDATED : Saturday, 07 November, 2009, 12:00am

High Court Judge Susan Kwan Shuk-hing yesterday gave the six former directors of Warderly International Holdings 28 days to make submissions in their defence against a Securities and Futures Commission application to ban them from being directors for up to 15 years.

The case involves the largest number of directors from one company facing such a ban in Hong Kong. It is the latest effort by the commission to punish those it believes have mismanaged companies and failed to make timely disclosures.

Five of the six defendants sent separate lawyers to represent them in court yesterday.

Only former executive director John Lai Wing-chuen attended in person without a lawyer. Lai had prepared a submission and tried to read it in court, but the judge asked him to submit it in writing.

Lai left the court without comment.

The other five are founding chairman Yeung Kui-wong, his daughter Ellen Yeung Ying-fong, Yu Hung-wong, Hermann Leung Ping-chung and Godfrey Hung Kwok-wa.

According to a submission by the SFC to the High Court two months ago, the six, who composed the entire board of the company from 2006 to 2007, 'failed to manage Warderly with the necessary skill, care, diligence and competence'.

The SFC submission said the six had not disclosed that the company was having financial problems and could not pay the wages of the workers at its Kalee factory in Dongguan.

This led to strikes between December 2006 and April 2007, mass resignations by many senior managers and the factory's eventual liquidation last year.

Yesterday, Kwan did not say when she would make the ruling but gave the six defendants 28 days to submit their defence against the SFC's proposed ban. She said the SFC could respond to the submissions in court.

The SFC suspended the company from trading in May 2007.

The company has a new board after a debt restructuring earlier this year.

The regulator's writ detailed the different roles of the six defendants in the company.

Lai was an executive director of the company from 2002 until June 2007, a month after its shares were suspended by the SFC. He was responsible for the sales and marketing department.

Yeung, the founder of Warderly, which sells electrical household products, was the chairman and managing director from 2002 to March 2007. He was in charge of overall business and maintained relationships with key clients.

To solve the company's cash-flow problems, Yeung in 2006 and 2007 pledged his entire shareholding of 231.8 million shares, or 54.52 per cent, to secure millions of dollars in loans from two independent third parties, Liu Su-ke and Derrick Luu.

However, the company defaulted on the repayments and the shares were transferred to the two lenders. Yeung ceased to be a shareholder in April last year.

The regulator said the six directors did not disclose the loans or the pledge to shareholders.

Ellen Yeung was an executive director from 2005 to January 2007 and was responsible for overall management and general administration.

Yu had only a brief stint as an executive director from January to March 2007.

He was previously a senior manager and responsible for the factory in China, the writ said.

Leung was an alternate non-executive director from 2003 to 2007. He had teamed up with Liu to lend HK$6 million to Warderly at an interest rate of 5 per cent per month, or about 60 per cent a year - substantially higher than most commercial loans with annual rates of 5 to 8 per cent.

The SFC claims Leung failed in his duty as a director by profiting from the excessively high interest rate.

Hung, an executive director from 2002, was the only one to stay on the new board until the SFC filed the writ. Hung, an accountant, was responsible for the financial planning.