The actions of the 10 former and current directors relate to the financial services firm’s acquisition and forced disposal of a stake in research and investing firm Liu’s Holdings.
Freeman managing director Quincy Hui Kwong Hei and former non-executive director Andrew Liu, along with the eight others, stand accused of breaching their duties as directors.
In January 2011, Freeman subsidiary Ambition Union acquired a 24.43% stake in Liu’s Holdings.
The stake was owned by the parents of Andrew Liu.
The SFC has accused Hui and Liu of getting Freeman to indirectly buy the stake in Liu’s Holdings in an attempt to circumvent objections from other members of the Liu family.
The family was, however, able to block the sale and the company was forced to sell the stake in July 2011, causing a loss of HK$76.8m to Freeman/Ambition.
Andrew Liu has been accused of failing to disclose to Freeman and its shareholders that the acquisition was opposed by some of Liu’s Holdings’ shareholders.
Additionally, he failed to disclose that the disposal was motivated by his own self-interest or that of his parents, rather than Freeman.
Hui, who previously worked at Credit Suisse and Deutsche Bank Group, was responsible for liaising with Liu regarding the acquisition and disposal of the stake in Liu’s Holdings.
He is accused of failing to make full and proper enquiries into the stance of other shareholders in Liu’s Holdings before getting approval from Freeman’s shareholders to proceed with the acquisition.
The other directors named by the SFC in its petition are; Lo Kan Sun, Sue Au Shuk Yee, Philip Suen Yick Lun, Scott Allen Phillips, Agustin V Que, Roger Thomas Best, Gary Drew Douglas, and Peter Temple Whitelam.
The regulator alleges that the 10 directors:
- failed to act in good faith and in the best interests of Freeman including a duty to disclose relevant material information to Freeman and its shareholders;
- allowed or caused false or misleading statements in Freeman’s announcements and circulars relating to the acquisition and disposal of the stake;
- failed to exercise reasonable care, skill and diligence in procuring or allowing Ambition to enter into the acquisition and/or disposal; and
- failed to take steps to pursue Liu and/or others for the loss suffered by Ambition/Freeman.
The first hearing is scheduled on 24 February 2017 before Hong Kong’s Court of First Instance.
Incorporated in the Cayman Islands and known in 2011 as Freeman Financial Corporation, the Hong Kong-listed firm engages in various financial services related businesses, including securities, insurance brokerage, wealth management, asset management, and financial planning.