香港聯合交易所有限公司
(香港交易及結算所有限公司全資附屬公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)

The Stock Exchange of Hong Kong Limited

CRITICISES:
1. Mr Chen Yen Fei, former executive director, chairman and chief executive officer of Pa Shun International Holdings Limited (Stock Code: 574); and
2. Mr Shen Shun, former executive director,

AND FURTHER DIRECTS:

Mr Chen and Mr Shen to attend training.

The Exchange found that in breach of the Listing Rules, Mr Chen and Mr Shen had failed to exercise reasonable skill, care and diligence to protect the Company’s interest in two acquisitions at both pre- and post- acquisition stages. They should have been aware that the acquisitions involved major risks, but they failed to take active steps to manage those risks.

In 2019, the directors approved the Company’s acquisitions of two target companies (being owners of 49% equity interest in property companies which agreed to purchase property units under construction in Malaysia). The remaining 51% interest was held by a Malaysian investor.

At the time of the acquisitions, the property companies had not yet fully paid the developer. The vendors assumed 49% of the outstanding payment obligations. The Company made full payment upfront by issuing new shares to the vendors with a total value of $64 million. The vendors undertook to indemnify the Company against all demands, losses etc. suffered or incurred by the latter arising from the property agreements. No other controls or restrictions were put in place to ensure that the consideration shares would not be sold without the Company’s prior consent or knowledge.

The vendors and the Malaysian investor failed to discharge their outstanding payment obligations to the developer. Construction was delayed and only completed in December 2021. In April 2022, the developer terminated the property agreements due to the non-payment, which was only found out by the Company until around the first half of 2022. None of the property units were delivered.

In breach of the Listing Rules, the directors:

• failed to conduct due diligence in respect of the financial capability of the vendors. The due diligence conducted was insufficient;
• failed to properly monitor the projects after the acquisitions, including that payments were being made by the vendors as well as the Malaysian investor and the construction was progressing. They failed to ensure receipt of updates in a timely manner; and
• did not procure the Company to, and the Company failed to, exercise its right to appoint any directors to the board of the property companies, and take any actions against the vendors and recover the loss and damage suffered by the Company as a result of non-delivery of the property units.

Ends