HONG KONG: SFC Commences Disciplinary Proceedings Against Ngai Lai Ha for Alleged Breach of Takeovers Code

Wednesday September 16 2020

On 16^th September 2020, the Securities and Futures Commission’s (SFC) Takeovers Executive commenced disciplinary proceedings before the Takeovers and Mergers Panel (Takeovers Panel) against Ms Ngai Lai Ha (Ngai), the chairperson of International Housewares Retail Company Limited (the Company) over a breach of the Code on Takeovers and Mergers (Takeovers Code).

The SFC alleges that in a number of acquisitions of the Company’s shares Ngai acquired on each occasion more than 2% voting rights of the Company from her lowest collective percentage interest in the preceding 12 months without making a mandatory general offer under the Takeovers Code.

Rule 26 is the overriding rule in the Takeovers Code and provides the circumstances in which a mandatory general offer must be made. This reflects General Principle 1 of the Takeovers Code and underpins the requirement for equal treatment of shareholders. Failure to make an offer that is required under Rule 26.1 constitutes a serious breach of the Takeovers Code.

Under Rule 26.1 a mandatory offer will be triggered whenever a person (together with persons acting in concert) acquires, whether through a series of transactions over a period of time or not, 30% or more of the voting rights of a company. This is known as the trigger.

A mandatory offer will also be triggered under Rule 26.1 if a person (together with persons acting in concert) collectively holds between 30% and 50% and acquires more than 2% from the lowest percentage held in any 12-month period. This is known as the creeper.

On 6 March 2019, the Concert Group’s shareholding in the Company reached 50.50% following Ngai’s purchase of 170,000 shares of the Company (Shares) at $2.01 per Share on the same date (the First Dealing). This represented an increase of more than 2% from the Concert Group’s lowest percentage interest in the Company in the preceding 12 months of 48.48%. No mandatory general offer was made as a result of the First Dealing.

Subsequent to the First Dealing, Ngai made 12 additional dealings in the Shares during the period from March to May 2019, and each of these dealings increased the collective percentage interest of the Concert Group by more than 2% from the lowest percentage interest in the respective preceding 12 months prior to the corresponding dealing. No mandatory general offer was made as a result of any of these dealings.

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