SFC seeks banning of ex-Warderly directors
The Securities and Futures Commission has applied for court orders to ban all six members of the former board of Warderly International Holdings from being directors for up to 15 years because of alleged misconduct and mismanagement.
Warderly, a household electrical appliances maker, has been suspended from trading since May 2007. It has a new board after a debt restructuring plan earlier this year.
The SFC's writ filed in the High Court yesterday names founding chairman Yeung Kui-wong, his daughter Ellen Yeung Ying-fong and four other directors - Yu Hung Wong, John Lai Wing-chuen, Hermann Leung Ping-chung and Godfrey Hung Kwok-wa. All except Hung resigned in 2007. Hung remains a director on the new board.
The writ claims the six failed to report the company's financial problems between July 2006 and April 2007 and Yeung's pledging of his entire shareholding for loans to keep Warderly afloat.
The SFC said the six had 'failed to manage Warderly with the necessary skill, care, diligence and competence'. They are also alleged to have breached the listing rules by failing to disclose a number of price-sensitive problems. Among them was the group's failure to repay bank loans and invoices from suppliers.
To solve the cash-flow problems, Yeung pledged his 231.8 million shares, or 54.52 per cent of the company, to secure millions of dollars in loans from two separate independent third parties, Liu Su Ke and Derrick Luu.
However, the company defaulted on the repayments and the shares were transferred to the two lenders. The directors did not disclose details of the loans or the pledge.
Leung had teamed up with Liu to lend HK$6 million to Warderly at a high interest rate of 5 per cent per month, or about 60 per cent a year, which is substantially higher than most commercial loans priced at about 5 to 8 per cent a year.
The SFC claims Leung failed in his duty as a director by profiting from the excessively high interest rate.
The company also did not disclose it had failed to pay wages to workers at its Kalee factory in Dongguan, which led to a number of strikes between December 2006 and April 2007. These caused disruption to its production lines and led many senior managers to resign and the factory to be liquidated last year.
The court case will be heard on November 6.