A case study in how one Hong Kong company was suspended from trade for 14 years, but not delisted

Chim Pui-chung, a two-term former Legislative Councillor, and a cancer survivor, revels in the Hong Kong Stock Exchange’s inability to delist a stock.

The Mandarin Resources Corp., in which Chim was chairman and director, holds the record for the period that any company’s stock had remained untraded on the Hong Kong bourse: 14 years.

Trading in Mandarin’s stock was suspended from 1986 through 2000 while Chim was locked in a legal battle with the Securities & Futures Commission involving allegations that he made unsreasonable transactions to benefit himself at the expense of other small shareholders.

In the ensuing trial, the judge found that Chim had engaged in conduct which was prejudicial to the interests of minority shareholders. Chim was order to pay compensation to the these shareholders by repurchasing their shares at a “fair value”, later assessed as HK$30 per share. Chim was also ordered to pay HK$30 million to the SFC to cover its legal costs. He was also ordered to divest himself of any material interests in Mandarin Resources. The also judge ruled that Chim be declared unfit to hold a position of management in Mandarin Resources, and that he be disqualified from acting as a director.

The SFC said at the time that it would not oppose the lifting of the trading suspension as long as Chim was no longer a stakeholder in the company.

Chim first became a legislator in 1991. He was expelled from the legislature in 1998 after being found guilty of plotting to forge share transfer documents. He was sentenced to three years’ jail, later reduced to 12 months on appeal. He returned to Legco in 2004 and served until 2012. In 2007 he was found to have cancer, but was treated and recovered.

As the rules stand, a company can only be delisted in Hong Kong if it has no business operations and has been suspended from trading for two years.