Telecommunications operator PCCW will probably seek ultimate approval from the Court of Final Appeal for its HK$15.93 billion privatisation if the Securities and Futures Commission wins a fight to stop the deal in the Court of Appeal, according to stock commentator David Webb.
Mr Webb, who was the first to disclose vote-rigging allegations surrounding the buyout deal to the SFC, yesterday wrote that there were plenty of appeal grounds against the High Court ruling that approved the deal earlier this month.
Senior Counsel Daniel Fung Wah-kin was expected to represent two PCCW minority shareholders in the Court of Appeal hearing on Thursday, sources said yesterday.
'[For PCCW, the reason to go to the Court of Final Appeal] is the money at stake. If the SFC loses, there will be pressure ... to throw in the towel, but it will depend on the reasons given by the Court of Appeal ... [The SFC] should go the Court of Final Appeal and clear the air for good,' Mr Webb wrote on his website.
He said the case had highlighted an urgent need to amend the law to remove the so-called headcount requirement for privatisation schemes.
Under the existing law, privatisation schemes need the approval of more than 50 per cent of attending shareholders at a meeting.
That requirement had led to the vote-rigging issue in the PCCW case as someone had split their shares and appointed representatives to increase their influence in support of the privatisation deal.
The SFC last week submitted to the Court of Appeal its reasons against the approval of the privatisation. The commission alleged that the relationship between Francis Yuen Tin-fan, a deputy chairman of Pacific Century Regional Developments, a majority shareholder of PCCW, and Inneo Lam Hau-wah, a regional director at Fortis Insurance Asia, led to the vote-rigging.
The securities regulator alleged Mr Lam distributed PCCW shares to Fortis agents as a bonus, without giving the agents a share certificate, and only the lump sum amount for the PCCW shares in question. It also alleged that Mr Lam distributed the shares only because of his personal relationship with Mr Yuen, not for his own financial benefit.
Mr Webb did not agree with the High Court ruling that there is no discernible public policy in Hong Kong regarding share splitting as the SFC has intervened in the proposed privatisation of Chinese Estates Holdings in 1992.
'The court surely has to take account of any evidence of unfairness in the process by which the proposal was approved by the requisite majority of shareholders, particularly when the proposal involves a compulsory purchase of shares from dissenting shareholders,' Mr Webb wrote.