Kwok Hiu Kwan, a main stakeholder of Convoy Global, has filed a lawsuit against the firm to prevent it from selling its holding in First Credit Finance Group, which is listed on GEM, Hong Kong’s market for small and medium-sized companies.
On 13 June, Convoy announced on the Hong Kong Stock Exchange (HKEX) that it plans to sell its 29.5% holding of First Credit for HK$61.01m (£5.8m, $7.7m, €6.7m) to Xiao Guoliang, whose background remains unknown.
The statement says the disposal is expected to bring an unaudited loss in the range of HK$311m to HK$324m to Convoy.
Ongoing investigation
In December last year, Hong Kong’s Independent Commission Against Corruption (ICAC) raided eight locations connected to Convoy and arrested four senior executives on suspicion of corruption.
Trading of the financial services group’s shares was halted on 7 December after its share price fell by 7%.
Hong Kong’s regulators are still investigating Convoy and several of its current and former employees.
Meanwhile, the fall-out has led to a string of lawsuits.
Shares suspended
According to the HKEX statement, First Credit is incorporated in the Cayman Islands and has a limited liability operation in Bermuda.
“First Credit is principally engaged in money lending business in Hong Kong,” the statement says.
The suspension of First Credit’s shares by Hong Kong’s Securities and Futures Commission (SFC) in November 2017 was one of the factors that prompted Convoy’s directors to look at disposing of its holding.
The suspension was due to a regulatory investigation into its link to the Convoy corruption charges.
Further, the directors said Convoy has no active involvement and board representation in First Credit despite being the single largest shareholder.
Kwok sues
In a second HKEX announcement, Convoy said Kwok is seeking to stop the sale of First Credit shares and has demanded the court declare the deal invalid.
The case will be heard in the High Court on 22 June.
“The sale of shares will not be completed before the adjourned hearing this Friday,” Johnny Chen, Convoy’s chairman and chief executive said.
“The company is currently seeking legal advice in respect of the foregoing and will keep the shareholders and potential investors of the company informed of any further material development by way of announcement as and when appropriate,” Chen said.
Kwok attempted to overthrow Convoy’s leadership team when he called an extraordinary meeting on the last day of 2017.
In the meeting he attempted to pass a motion to remove six directors of the firm and appoint three he had nominated.
His plan was thwarted, however, as the then-interim chairman, Johnny Chi-Weng, ruled that the shareholder’s voting rights were invalid.
