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Li Ka-Shing

Often referred to as “Superman” in Hong Kong because of his business prowess, Li Ka-shing is the richest businessman in Asia, and chairs conglomerate Hutchison Whampoa and Cheung Kong Holdings, a property group. Li turned Cheung Kong Industries into a top property group, and Cheung Kong expanded to acquire Hutchison Whampoa in 1979 and Hongkong Electric in 1985. Li is a noted philanthropist and heads a charitable foundation that is a shareholder in Facebook.

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Cheung Kong's sales of Apex Horizon hotel suites cancelled over investment breach

Watchdog rules that deals for Cheung Kong's suites at prestigious Apex Horizon complex broke law, with 360 deposits to be refunded

PUBLISHED : Monday, 13 May, 2013, 5:14pm
UPDATED : Tuesday, 14 May, 2013, 9:57am

Cheung Kong (Holdings) will refund deposits and cancel the sales of its hotel suites after a securities watchdog probe found the deals breached the law as unauthorised investments.

The property giant chaired by Li Ka-shing raised HK$1.4 billion in February by selling 360 hotel units at its Apex Horizon project in Kwai Chung.

The sales drew scrutiny because the developer used a legal loophole to try to help buyers avoid paying a residential stamp duty that was aimed at cooling the property market but did not apply to hotel rooms.

However, avoiding the duty was not the reason regulators gave for blocking the deals.

The Securities and Futures Commission said an agreement had been reached with Cheung Kong to unwind the sales.

The developer will refund the deposit and any part payments together with interest at 2 per cent per annum above the prime rate from the time of the payment to the end of this month.

It will offer buyers HK$10,000 in legal and other expenses.

An SFC investigation found the sales to be a collective investment scheme (CIS) - a project involving a group of small investors. But to do this under local law, Cheung Kong must first seek SFC approval for promotional documents to make sure they disclose all investment features and risks before any sales.

The SFC ruled the hotel unit sales to be a CIS because the day-to-day management of the hotel is in the hands of a separate operator, not the individual buyers.

The SFC had earlier informed Cheung Kong that it planned to take the case to court, but that action is no longer necessary.

SFC chief executive Ashley Alder said: "The SFC considers this is a sensible outcome. The SFC will monitor the progress by the Cheung Kong parties to unwind the sale to determine if further action is required."

Cheung Kong executive director Justin Chiu Kwok-hung said: "We did nothing wrong. But we think we should support the government in their administration according to the law … society now needs harmony. We want to see this matter resolved quickly."

The company told buyers in a letter that "if the buyer does not agree to cancel the provisional sale and purchase agreement, the SFC may bring proceedings in the Court of First Instance and apply for a [court] order that the contracts be declared void."

A Cheung Kong spokesperson said the company would reconsider an option to list its hotel on the Hong Kong stock exchange.

One buyer who signed a provisional agreement for sale and paid a deposit of HK$200,000 said she had not decided whether to accept the compensation offer.

"I wanted to buy it for myself to live in, and the developer and agents had told me I could do so. They are just outrageous," she said, adding staff did not let her read the hotel operation agreement when she signed the deal.

In 2001, Cheung Kong cancelled a promotion after the SFC investigated a plan to link rebates for its Victoria Towers development in Tsim Sha Tsui to the performance of the stock market.

 

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14 May 2013 - 12:00am
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This article is now closed to comments

boondeiyan
To the anonymous person using pseudo-profanity to voice out some inferiority complex about LKS: Here in the HKSAR, consenting adults are still free to be greedy and the (smarter) tycoons are doing what they have done for decades -- separating greedy fools from their money. If you want to understand one of the SFC's major motivations here, read up on the Lehman mini-bond saga. And give some thought to what @johnwe wrote here.
cliffforster
Justin Chui Kwok-hung is quoted as saying "we did nothing wrong." The SFC thinks otherwise. It is clearly a matter of public interest that the court should rule on this. For many years there have been different interpretations as to what amounts to an offer for sale of securities to the public. This would be a valuable test case to clarify the issue.
johnwe
It is a compromise and that means everyone gives some and take some. Cheung Kong were forwarned that the sale could be illegal but their legal advisors thought otherwise and continue to do so, so they ignored government orange light and went ahead with the sales.
The buyers knew that the legality of the sale was being challeneged but took a gamble. Like all gambles some win, some lose. They don't get their purchase but they are damn lucky to get refund + interest.
SFC had the gumption to stand up to CK and say its illegal and if you do not undo it we will go to court. CK settled and even agreed a settlement for the buyers, the oprtion being cheaper than a court case whcih they had a high likeliehood of losing. If they had gone to court, the taxpayers would have to foot SFCs legal fees.
Of course SFC could have hit CK with a fine and made it undo the sales anyway, in which case the buyers will be fighting CK.
daily
Oh fully agree........it's about time the government stood up to this old foool who thinks he can always outsmart everyone.........This should mark the start of the downfall of his empire cause he's too old to do battle anymore and his elder son does not have the competency to fight..........about time.
the sun also rises
This richest old guy in Asia is struck once again after the dockers' strike.Now his company:the Cheung Kong Holdings has to hand back to the original buyers the money they paid and the interests incurred plus legal fees as well. How miserable and infamous this Superman has looked ! Maybe he deserves it indeed !

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