HONG KONG: SFC Publicly Censures Zhang Qiang for Breach of the Takeovers Code

Wednesday December 20 2017

The Securities and Futures Commission (SFC) has publicly censured Zhang Qiang for acquiring shares within six months after the close of an offer at above the offer price in breach of Rule 31.3 of the Takeovers Code.

On 24th May 2017, Zhang made an unconditional mandatory general offer in cash for the shares of Feishang Non-metal Materials Technology Limited at $0.70 per share. The offer closed on 14 June 2017. On 25 July 2017, Zhang made a series of on-market acquisitions of a total of 2,000,000 shares at prices ranging from $1.47 to $1.50 per share.

Breach of Rule 31.3 of the Takeovers Code

Rule 31.3 of the Takeovers Code states that “Except with the consent of the Executive, if a person, together with any person acting in concert with him, holds more than 50% of the voting rights of a company, neither that person nor any person acting in concert with him may, within 6 months after the end of the offer period of any previous offer made by him to the shareholders of that company which became or was declared unconditional, make a second offer to, or acquire any shares from, any shareholder in that company at a higher price than that made available under the previous offer. For this purpose the value of a securities exchange offer shall be calculated as at the day the offer became, or was declared, unconditional.”

The Executive has further issues a reminder to all those involved in takeovers and mergers in Hong Kong of the prohibition imposed by Rule 31.3 of the Takeovers Code. Rule 31.3 affords equality of treatment to shareholders in an offer in accordance with General Principle 1 of the Takeovers Code. The rule provides shareholders with certainty that an offeror will not pay a price higher than the offer price for the shares in the offeree company in the 6-month period after the close of an offer, and as a result, it ensures that all shareholders of the offeree company are treated even-handedly.

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