HONG KONG: SFC Imposes 24 month ban for breach of the takeover code

Thursday November 24 2016

The Securities and Futures Commission (SFC) has publicly censured and imposed a cold-shoulder order against Zheng Dunmu for breaching the mandatory general offer obligation of the Takeovers Code. Zheng will be denied direct or indirect access to the Hong Kong securities market for a period of 24 months commencing on 22 November 2016 to 21 November 2018.

At the relevant time, Zheng was chairman, executive director and a controlling shareholder of Changgang Dunxin Enterprise Company Limited and held a 56.25% interest in Changgang Dunxin indirectly through three companies wholly owned by him. Part of this interest was pledged to a lender as collateral for a loan.

On 23 February 2015, the lender sold the pledged shares, reducing Zheng’s indirect interest in Changgang Dunxin to 46.18%. Shortly after becoming aware of the disposals, Zheng personally acquired 1.01% and 2.97% of Changgang Dunxin on 26 and 27 February respectively. A mandatory general offer obligation under the Takeovers Code was triggered on 27 February as Zheng increased his interest in Changgang Dunxin to 50.16%, but no offer was made.

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