The warning was released by Convoy on 9 January and sheds light on a writ the company filed on 19 December with the Hong Kong High Court.
Among other things, it requests that the shares of several investors, including the company’s second largest shareholder Kwok Hiu-Kwan, be invalidated.
Convoy has been embroiled in an ongoing corruption investigation that has seen its shares halted from trading, its offices raided, several directors arrested, a thwarted boardroom takeover and the resignation of an executive director.
The company is also suing 28 current and former directors and employees for HK$4.043bn ($516m, €432m, £381m) of company assets siphoned through a complex network of companies.
Convoy warns in the announcement of dealing with “Wrongly Allotted Shares” that were obtained by six investors, referred to as the “Placees”, through an equity fund raising drive in 2015.
“The net proceeds from the placing were announced to be used in margin and initial public offering financing services being developed by the group and as additional capital for the money lending business of the company,” the announcement said.
The proceeds, according to the company, were not used for these purposes however, and were instead channelled back to the placees “through a series of suspicious loans and margin finance granted by the group on non-commercial and/or irrational terms and/or under suspicious circumstances”.
“Contrary to the intended uses, the proceeds raised from the placing was not used for genuine and/or legitimate money lending or margin financing businesses in the interests of the company and/or its shareholders and was instead dissipated to the placees through the circular financing facilities,” the announcement says.
Kwok holds 29.91% of the company’s shares, and called an extraordinary meeting on the last day of 2017 to pass a motion to remove six directors of the firm and appoint three he had nominated.
His plan was thwarted, however, as the interim chairman Johnny Chi-Weng ruled that the shareholder’s voting rights were invalid due to the writ.
Kwok disputes this, saying that if his votes had been counted at the meeting, then his resolution would have been passed and the six directors would have been removed.
“This shows that besides my votes, most other shareholders are voting on my side to support removing certain existing directors and appointing some new ones to maintain the stability of the company,” Kwok said.
“The chairman’s decision to declare my votes as invalid is thus acting against the interests of other shareholders,” he said.
The announcement says Kwok, between 7 July and 16 August 2017, acquired the wrongly allotted shares from the five other placees “in a coordinated and systematic manner until his shareholding is just short of the 30%”.
If Kwok had acquired more than 30%, it would have triggered a requirement to make a general offer to purchase all shares in the company.
For this reason, the writ requests that Kwok’s shares be declared null and void by the High Court and for the shares of the five other placees to be “set aside”.
“In the circumstances, shareholders, potential investors, stockbrokers, banks and others who deal in securities on behalf of clients are advised to exercise extreme caution when dealing with the wrongly allotted shares.”
The High Court has not yet released its decision.