The Securities and Futures Commission (SFC) has publicly censured and imposed a 24-month cold-shoulder order against Zheng Dunmu for breaching the mandatory general offer obligation of the Takeovers Code.
At the relevant time, Zheng was chairman, executive director and a controlling shareholder of Changgang Dunxin Enterprise Company Limited and held a 56.25% interest in Changgang Dunxin indirectly through three companies wholly owned by him. Part of this interest was pledged to a lender as collateral for a loan.
On 23 February 2015, the lender has sold the pledged shares, reducing Zheng’s indirect interest in Changgang Dunxin to 46.18%. Shortly after becoming aware of the disposals, Zheng has personally acquired 1.01% and 2.97% of Changgang Dunxin on 26 and 27 February respectively. A mandatory general offer obligation under the Takeovers Code was triggered on 27 February as Zheng increased his interest in Changgang Dunxin to 50.16%, but no offer was made.
Zheng told the Executive that he has not been aware of the mandatory general offer obligation. He accepted that he has breached the Takeovers Code and deprived Changgang Dunxin’s shareholders of the right to receive a general offer for their shares. Zheng agreed to the current disciplinary action against him.
Brian Ho, SFC
Mr Brian Ho, the SFC’s Executive Director of Corporate Finance, commented:
Directors of a listed company must use the best of their abilities to comply with the Takeovers Code and seek professional advice as and when needed. Zheng’s conduct fell short of the standards expected and disregarded one of the most fundamental provisions of the Takeovers Code. This merits strong disciplinary action.