Advertisement
Advertisement

Reform of takeover rules the only meaningful action

Reports that officers from the Commercial Crime Bureau raided the home of PCCW chairman Richard Li Tzar-kai before the Lunar New Year were carried in a number of local newspapers, including this one. The operation, assisted by the Justice Department, was linked to Li's failed attempt last April to privatise PCCW for HK$15.93 billion.

Police also searched the Hong Kong offices of Fortis Insurance (Asia), which, together with PCCW, was at the centre of last year's court battle with the Securities and Futures Commission that ultimately succeeded in scuttling the buyout attempt.

But, so far, there have been no arrests or further developments. Li's lawyer said the company would fully co-operate with the investigation, stressing that Li was not the actual target of any probe.

Even whistleblower David Webb said the investigation came too late. Webb made the issue public by reporting, to the SFC and the Independent Commission Against Corruption, allegations of vote-rigging in the privatisation exercise.

Fortis became involved when hundreds of its agents were among 800 people who became PCCW shareholders shortly before investors accepted the privatisation offer from Li and China Unicom Group last February.

It was reported that Fortis staff had been given 500,000 PCCW shares as bonuses in return for them voting in favour of the privatisation offer, which was made through Li's Pacific Century Regional Developments.

The deal collapsed after the Court of Appeal ruled that the stock distribution was part of a 'clear manipulation' of the shareholders' vote and had hurt minority shareholders.

If the police searches were really about furthering the investigation, they came almost a year too late. The fact is that the SFC has already sifted through all relevant documents related to the case and concluded in December that no further action would be needed. The high-profile operation was therefore meaningless.

Rumours have been circulating in pro-establishment circles that the police action might have been connected to unfounded speculation of Li's support for the de facto referendum scheme. Speculation abounds that the tycoon backs the Civic Party over the resignation of five lawmakers to challenge the government on constitutional reform, and has been punished for it. If the rumour is true, it would be a case of political persecution.

I believe it was a public relations exercise with a populist tone to placate the public. We should never underestimate the political acumen and wisdom of Secretary for Justice Wong Yan-lung, who has earned the moniker 'Teflon politician' because no stain ever sticks to his impeccable reputation. Not only will the police inquiry be futile but, even if they could substantiate the claims of vote-rigging, it would not result in any legal proceedings because it is not an offence under the current law.

The Court of Appeal has already ruled against the privatisation deal, saying the issue of shares was dishonest and would have had an unfair impact on the final vote.

The only outstanding issue is how to modernise the half-century-old rules to reflect changing times and meet demands. The current system is outdated; it has created conflicts and loopholes, rendering it ineffective in protecting individual shareholders' interests.

Not only is the current system opaque, but it fails to balance the interests of various stakeholders, causing constant confusion and conflict. We need to improve the regulatory framework to better facilitate takeover and merger operations, and share purchases, in order to further strengthen our position as an international financial centre.

A failure to make meaningful reforms will only bring long-term damage to our reputation as an international financial centre.

Albert Cheng King-hon is a political commentator. [email protected]

Post