DIRECTORS at recently listed Rich City Packaging Holdings are under investigation and face possible censure by the Hong Kong Stock Exchange for inadequate disclosure in the company's offer document. The probe into the company and its listing sponsor, Barclays de Zoete Wedd (BZW), comes after disclosure of a writ filed by Rich City's major customer, United States-based Jewelpak. Rich City was listed on April 29 at a price of HK$1. Jewelpak filed a writ against Rich City on July 25 claiming compensatory and punitive damages of an unspecified amount. Rich City has responded by denying the claim and filing a counter-suit claiming US$4.4 million. The dispute relates to alleged quality problems in Rich City products. Jewelpak, a distributor, accounted for 47 per cent of Rich City's profit in the six months to September 30 and 45 per cent of total sales for the year ended March 31, according to the firm. In the share prospectus, it was stated that Rich City had a ''very good and close relationship with Jewelpak''. But Rich City did not disclose that it provided a US$270,000 credit to Jewelpak last January as settlement of an earlier claim of defective products. The prospectus made this statement on quality control: ''The directors believe commitment to maintaining the high quality of its products is one of the prime contributors to its success. ''As a result of the group's stringent quality control procedures, claims or complaints from customers in respect of defective products during the past three years have been insignificant.'' Saw Lip Boon, managing director of Rich City, said: ''The directors and sponsors verify that having made all reasonable inquiries, and to the best of their knowledge and belief, statements in the prospectus were accurate and there were no other facts the omission of which would make such statements misleading at that time. ''At the time of publication and prior to listing on the stock exchange, there had been no change in relationship with Jewelpak and there had been no indication that it would change, as it did, shortly after,'' he said in a notice to shareholders. Head of listings at the stock exchange, Herbert Hui, said he could not comment on the company because an investigation was in progress. But Mr Hui said that, in general, the stock exchange was always particularly concerned about receiving good disclosure on major customers. ''The stock exchange relies on the sponsors to gather information and, in situations where there is a single very important customer, the exchange makes it very clear to the sponsor that the shareholders need to know where they stand,'' he said. ''It is something we would discuss with the sponsor and ask if it was looking very closely.'' Where improper disclosure was made, the stock exchange treated it seriously, said Mr Hui. A company and a sponsor found not to have made proper disclosure could face censure from the listings committee up to and including the ultimate sanction of the stock exchange - cold shouldering from the market. Rich City says it is owed US$4.2 million by Jewelpak for goods shipped in January, February and March, which should have been paid in April, May and June. It also claims that although the problems with Jewelpak will lead to a decline in short-term profitability, the directors ''do not foresee any significant impact on the group's liquidity or cash-flow position''. BZW declined to comment on the issues raised by the court cases, directing reporters to the stock exchange announcement. Deloitte Touche Tohmastu, Rich City's auditor and auditor of the accounts in the prospectus, also declined to comment, citing client confidentiality. Deloitte has been criticised for auditing standards in Financial Secretary reports on Allied group firms and Tomson Pacific and related firms. The accountancy firm was also auditor of four of six ''dirty floats'' underwritten by Standard Chartered.