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Regulation

SFC asks court to disqualify Hanergy former chairman and four directors for up to 15 years

PUBLISHED : Monday, 23 January, 2017, 8:56pm
UPDATED : Monday, 23 January, 2017, 10:59pm

The Securities and Futures Commission on Monday sought a Hong Kong court order to disqualify the former chairman and four directors of Hanergy Thin Film Power Group to act as directors for up to 15 years, the regulator said in a statement.

The five include Hanergy former chairman Li Hejun as well as current independent non-executive directors Zhao Lan, Wang Tongbo, Xu Zheng and Wang Wenjing.

The SFC action is sanctioned under section 214 of the Securities and Futures Ordinance, which gives it the authority to petition a court to ban an individual from acting as a director or manager for a company for up to 15 years.

Li resigned on May 20 as executive director and chairman of Hanergy, but the SFC said he remained a major shareholder of the firm.

The SFC also sought a court order for Li to procure that Hanergy’s parent company, Hanergy Holding Group, to pay all outstanding receivables due to Hanergy.

It said its action came after investigation into various very substantial connected transactions between Hanergy and Hanergy Holding since 2010. The first hearing will be held on May 31.

“The SFC alleges that the five directors failed to question the viability of Hanergy’s business model, which relied on the sales of solar panel production systems to its connected parties, Hanergy Holding and its affiliates, as its main source of revenue; and failed to properly assess the financial positions of the connected parties and hence the recoverability of the receivables due from them as a result of these connected transactions,” the commission said.

“They also failed to take proper steps to recover these receivables by putting the interests of the connected parties before those of Hanergy, and so did not act in Hanergy’s best interests.”

Hanergy, a Hong Kong main-board listed company that makes thin-film solar photovoltaic modules, was suspended from trading on May 20, 2015, after its share price dived 47 per cent in 70 minutes. The SFC in December 2015 ordered its trading be suspended indefinitely until certain disclosure requirements were fulfilled.

In its last set of audited financial statements covering figures in 2015 for which it posted a net loss of HK$12.23 billion, external auditor E&Y said it was unable to obtain “sufficient appropriate audit evidence” from Hanergy on the recoverability of HK$4.93 billion of trade receivables due from customers and some prepayments they made.

“This [loss] ... in the consolidated financial statements indicates the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern,” the auditor said.

Of the HK$2.6 billion of trade receivables owed to listed Hanergy by its parent and sister firms, HK$1.71 billion was more than six months overdue. Thanks to multiyear agreements by its parent to buy US$8.5 billion of solar panel production lines, Hanergy booked handsome profit for several years before 2015.