Director Qisqualification Over Timely Disclosure

SFC has recently obtained orders in the High Court to disqualify two former executive directors of Warderly International Holdings Ltd for failing to ensure timely disclosure of material information to the company's shareholders. This is the first time directors have been disqualified for this type of misconduct.

The orders disqualify Ms Ellen Yeung Ying Fong and Mr John Lai Wing Chuen, from being directors or being involved in the management of any corporation, without leave of the court, for five years, effective 7 April 2010.

Both Yeung and Lai accepted they had breached their duties to Warderly by failing to manage the company with appropriate care. In particular, they agreed they failed on a number of occasions to ensure Warderly complied with the disclosure requirements under the Listing Rules and to give shareholders all the information they might reasonably expect. SFC is also taking similar action against four other former directors of the company.


SFC directed trading to be suspended in the company's shares in May 2007 and consequently, focused its investigation on events between July 2006 and April 2007. SFC alleged that the company should have disclosed its substantially depleted financial position to the market:

• there were legal proceedings underway in Hong Kong and the Mainland against Warderly and its subsidiaries by banks and creditors to recover overdue loans;
• Warderly’s operations were substantially disrupted by labour strikes in its Mainland factory;
• the company had appointed a financial adviser in respect of a proposed debt restructuring and re-organisation;
• a management committee had been appointed to solve Warderly’s financial problems;
• an external firm of accountants had been appointed at the request of a bank loan syndicate and had reported on the company’s deteriorating financial position; and
• the company was forced to raise money by way of loans at penalty interest rates to stay afloat.

(Jack's comment: In the future, when certain disclosure requirements of the Listing Rules have been codified under the SFO regime, those directors who fail to make timely disclosure of material information may even bear criminal liability.)