Qunxing Paper goes into receivership under court order

SFC steps up action against paper maker after its unit secretly seeks restructuring on mainland

PUBLISHED : Tuesday, 01 April, 2014, 1:20am
UPDATED : Tuesday, 01 April, 2014, 1:20am

The Securities and Futures Commission has obtained a Hong Kong court order to appoint interim receivers to take over the management of decorative paper maker Qunxing Paper after its major subsidiary secretly started a bankruptcy proceeding on the mainland.

The regulator said yesterday that it got an order from the Court of First Instance, for which it urgently applied last Friday, to appoint Roderick Sutton, Fok Hei-yu and John Batchelor of FTI Consulting to act as interim receivers to investigate Qunxing's affairs. They could also suspend the company's board to effectively take over its management.

The commission escalated its regulatory action against Qunxing after it found that a mainland court accepted a restructuring proceeding application under the mainland bankruptcy law on February 21 from Shandong Qunxing Paper, the wholly owned subsidiary of Qunxing.

It said commencement of bankruptcy proceedings on the mainland by Shandong Qunxing was price-sensitive information but the company did not make the disclosure even after the commission's requests.

"The SFC alleges Qunxing has kept its shareholders, the wider Hong Kong market and the SFC completely in the dark. Despite being queried by the SFC, Qunxing continues to fail to inform the investing public of these matters," it said last night.

"The SFC considers the events raise grave concerns that the interests of Qunxing's public shareholders are in jeopardy, hence the need for an urgent application to appoint receivers and managers for Qunxing."

Shandong Qunxing is the sole operational arm of Qunxing and held most of the listed company's 3.27 billion yuan (HK$4.1 billion) in assets.

In December, the commission got another court order to freeze HK$1.9 billion of Qunxing's assets for allegedly giving misleading information in its listing prospectus in 2007 and documents related to its warrants in 2011.

The regulator said yesterday that it could only locate HK$150 million of assets the company had deposited in Hong Kong that could be placed under a freeze order. Its other assets were mainly on the mainland.

The Hong Kong court will hear the matter again on Friday to decide whether to continue the appointment of the interim receivers. Separately, it will hear on the same day Qunxing's application to discharge the asset-freeze order.

Qunxing, chaired by Zhu Yuguo, makes decorative base paper used in the manufacture of furniture and wooden floors. Trading in its shares has been suspended since March 2011 after KPMG said it found inconsistent information during an audit in 2010.