The Hong Kong Securities and Futures Commission (SFC) has obtained a court order requiring two former directors of ARTA TECHFIN Limited (00279) to pay the company HK$57.5 million in compensation. The order targets former non-executive director Liao Junlun and former managing director Xu Guangxi for causing the company to suffer financial losses related to the acquisition and subsequent disposal of shares in Liao's Group Company Limited.
Additionally, Liao and Xu are prohibited from acting as directors of ARTA TECHFIN or any other corporation, or being involved in their management in any way, without court permission. The bans are for eight years and six years, respectively. The court specifically noted that Liao's misconduct was the most serious, while Xu played a major role in the transactions.
Seven other former executive directors and independent non-executive directors of ARTA TECHFIN were disqualified from acting as directors for periods ranging from one to two years. They are Lu Gengxin, Ke Shuyi, Sun Yilin, Scott Allen Phillips, Agustin V Que, Gary Drew Douglas, and Peter Temple Whitelam. These individuals, along with Liao and Xu, were also ordered to pay the SFC's legal costs.
The SFC initiated legal proceedings under the Securities and Futures Ordinance in October 2016, seeking court orders against the individuals for breaching their director duties. The breaches concerned the acquisition of Liao's Group shares in 2011 and their disposal months later, which resulted in substantial losses for ARTA TECHFIN.
The court ruled that Liao, Xu, and the seven other former directors were responsible for conducting or managing ARTA TECHFIN's business in an oppressive manner. This involved misfeasance, breach of duty, or other misconduct towards the company or its members, constituting unfairly prejudicial conduct, leading to the compensation and disqualification orders.
The court emphasized that regardless of whether they were executive or non-executive directors, they bore equal legal responsibility for managing ARTA TECHFIN's business. This included a duty to scrutinize proposals that could directly impact shareholders' interests. The court further stated that the duration of the disqualification orders appropriately reflected their respective levels of involvement and the seriousness of their misconduct.
Mr. Michael Duignan, the SFC's Executive Director of Enforcement, welcomed the ruling. He stated that the decision sends a clear message that all directors—executive, non-executive, or independent—are fully accountable for neglecting their fiduciary duties or failing to protect company interests. The SFC remains committed to upholding the highest standards of corporate governance and personal accountability and will not hesitate to take decisive action to defend investors, protect company assets, and maintain market integrity.