Disqualification & Compensation Orders Against Listed Company's Directors

SFC has recently commenced proceedings in the High Court to seek disqualification and compensation orders against the current chairman, Mr Cheung Keng Ching, a current executive director, Ms Chou Mei, and a former executive director, Mr Lau Ka Man Kevin, of Rontex International Holdings Ltd (Rontex), a Hong Kong-listed company engaged in the trading of garments and premium products.

SFC alleges that the three directors:

• breached their fiduciary duty and/or duty of care owed to Rontex;
• failed to ensure Rontex fully complied with disclosure requirements under the Listing Rules; and
• failed to exercise reasonable skill, care and diligence in entering into a number of transactions, resulting in Rontex suffering losses and damages of about $19m.

The alleged breaches are centred on four investments involving:

• the acquisition of 3.62m shares in Grandtop International Holdings Ltd, a company listed on SEHK, for $9.263m, which represented an unjustifiable premium of 45% over the prevailing market price for such shares;
• the acquisition of $15m in options for shares in Macau Asia Investments Ltd, a United States-incorporated company listed as a Pink Sheet stock on the American Stock Exchange;
• three payments totalling $27.7m to a Mainland Chinese citizen named Wan Lin; and
• an investment of $8.454m in Beijing Kut Ka Lok Fashion Apparels Ltd.

SFC alleges Rontex suffered losses and damages of about $19m as a consequence of the alleged misconduct by the three directors. SFC is seeking orders that the three directors be disqualified as company directors and that they pay compensation to Rontex.

I am interested to know:

• What did trigger SFC's investigation into Rontex's transactions before commencing the legal proceedings?
• Why didn't SFC refer this case to CCB or ICAC?