Trio of Convoy lawsuits to be heard in tandem in Hong Kong
Three lawsuits relating to financial impropriety at Hong Kong Stock Exchange-listed financial advisory firm Convoy Global will be heard together on 6 March, a judge at Hong Kong’s High Court ruled today.
The story, as reported by International Investment, broke on 8 December when three senior executives of companies listed on the Hong Kong Stock Exchange were arrested in the ongoing clampdown on corruption that is seen as a key policy of Chinese president Xi Jinping.
Three cases relating to the scandal, two brought by shareholders and one by Convoy itself against former directors, are all related, said the judge, and consequently should be heard together.
Mr Justice Jonathan Harris ruled that the first case, brought by a small shareholder named Zhu Xiaoyan should be heard alongside two others, one brought by Convoy’s new management and another by its second-largest shareholder, Kwok Hui-kwan.
Zhu had issued proceedings against some 32 defendants that included former chairman and the second-largest shareholder named above, Kwok.
Zhu said that she was out of pocket to the tune of about HK$2 million (£184,000, US$256,000) loss on her investment in Convoy.
She is also petitioning the court to declare Kwok’s shareholdings invalid.
She claimed that her total losses – triggered, she said, by a number of private placements by Convoy in 2015, according to the South China Morning Post – amounted to HK$4bn (£1.84m, US$2.56m) .
‘Shadowy network’ controlled by Convoy executives
Convoy had places the shares in the Enigma network of 50 Hong Kong-listed small-cap companies with cross shareholdings in each other that a shareholder activist David Webb had uncovered and identified.
This network is said to have been controlled by a former Convoy executive director, Roy Cho Kwai-chee, who then sold the shares to Kwok, who as a result became Convoy’s second-largest shareholder, the petition said.
Convoy, which serves mainly Hong Kong’s residents, is one of the former UK colony’s largest financial advisory firms, with around 100,000 clients, including those of the pension scheme the Mandatory Provident Fund.
On 11 December, International Investment reported that Convoy chairman Quincy Wong Lee-man, pictured above, had been arrested in a joint operation by the anti-graft Independent Commission Against Corruption (ICAC) and Securities and Futures Commission officials.
The operation on 8 December had involved about 50 officers, and 12 Convoy employees including the company’s executives had been taken to ICAC’s headquarters for investigation. Officers searched Convoy’s head office.
Fong was also taken by anti-corruption officers from her home to the ICAC offices, while officers also searched her home and removed some documents, it was reported.
Last week, International Investment reported that Tan Ye Kai had resigned from his post as a Convoy executive director, with Ip Yee Kwan named an executive director, in a complex, ongoing boardroom battle at the embattled financial advisory firm.
Separetely to Zhu’s case, Kwok is suing Convoy’s new chairman, Johnny Chen, who is supported by the company’s largest shareholder and Kwok’s rival for control, the Taiwanese Tsai family.
Kwok is unhappy that Chen invalidated Kwok’s shares at a shareholder meeting on 29 December.
This act meant that Chen was able to overturn Kwok’s motion to remove eight directors backed by the Tsai family, instead appointing his own.
Mr Justice Jonathan Harris asked why Zhu was seeking to invalidate Kwok’s shares when Convoy had already done so.
Zhu’s lawyer, who appeared on her behalf in court, said that Zhu’s fear was that the shareholder meeting of 29 December might have led to a change of management at Convoy, so she took action herself.