Hong Kong SFC Secured $24.6 Million Compensation Settlement in Hong Kong Court as Special Dividend from 3 ex-Directors to Pay Shareholders of Hong Kong-Delisted Combest Holdings Limited, Caused Combest to Acquire 2 Subsidiaries in 2016 & 2017 Overvalued by $29 Million, Caused Combest to Take Loans for No Commercial Reasons and Paid Interest & Fees of $8.2 Million, Inflated Combest Revenue Between 2016 to 2019 and Suffering Losses of $37 Million, 3 Individuals are Shadow Director Ng Kwok Fai, Executive Directors Liu Tin Lap & Lee Man Who are Disqualified as Director, Receiver or Managerial Roles for 12 Years, 8 Years & 8 Years Respectively
3rd June | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has secured $24.6 million (HKD 192 million) compensation settlement in Hong Kong court as special dividend from 3 Combest ex-directors to pay shareholders of Hong Kong-delisted Combest Holdings Limited, having caused Combest to acquire 2 subsidiaries in 2016 & 2017 overvalued by $29 million, caused Combest to take loans for no commercial reasons and paid interest & fees of $8.2 million, inflated Combest revenue between 2016 to 2019 and suffering losses of $37 million. The 3 individuals are shadow Director Ng Kwok Fai, Executive Directors Liu Tin Lap & Lee Man To who are disqualified as director, receiver or managerial roles for 12 years, 8 years & 8 years respectively. Hong Kong SFC (2/6/25): “The Securities and Futures Commission (SFC) has obtained orders in the Court of First Instance for a record compensation in the form of special dividend to public shareholders of Combest Holdings Limited (Combest) and to disqualify a shadow director, Mr Ng Kwok Fai, and two former executive directors, Mr Liu Tin Lap and Mr Lee Man To, of the now delisted company for their misconducts (Notes 1 and 2). The court order was granted following a first-of-its-kind settlement secured by the SFC for the trio to pay about $192 million to an administrator jointly appointed by the SFC and Combest for redistribution as special dividends to independent public shareholders. Furthermore, Ng was disqualified for 12 years, and Liu and Lee for eight years respectively, from being a director, liquidator, receiver or manager, and being involved in the management of any corporation. They were also ordered to pay the SFC’s costs in the proceedings (Notes 3 and 4). The SFC’s investigation revealed that, at the material time, Liu and Lee acted upon Ng’s directions and instructions to operate and manage the affairs of Combest. Together, the trio orchestrated the acquisition of two subsidiary groups that were substantially overvalued by $229 million in 2016 and 2017, as well as payments of fictitious loan interests and fees totalling $64 million to entities related to Ng, and grossly inflated Combest’s revenue artificially generated by entities related to Ng across various accounting periods between 2016 and 2019. The Court found that, among others: 1) the misconduct and breaches of duty established against Ng fall within the top bracket in terms of seriousness. 2) Liu and Lee actively and knowingly assisted Ng and hence a disqualification period falling towards the top end of the middle bracket is appropriate. 3) the compensation scheme is in the public interest as it would ensure independent public shareholders of Combest are compensated … … Bruno Arboit of Kroll (HK) Limited, who has been jointly appointed by the SFC and Combest as the administrator, will implement the compensation scheme and administer the distribution of the special dividends to Combest’s independent public shareholders as at the date when the funds are deposited in the administrator’s bank account. The administrator will contact the relevant shareholders of Combest in due course. Combest’s shareholders may contact the administrator at its email [email protected] or its hotline at (852) 2281 0108 if they have any queries.” In 2024 September, The Hong Kong Securities & Futures Commission (SFC) has secured $24.6 million compensation settlement from 3 Combest ex-directors to pay shareholders of Hong Kong-delisted Combest Holdings Limited, causing Combest to acquire 2 subsidiaries in 2016 & 2017 overvalued by $29 million, caused Combest to take loans for no commercial reasons and paid interest & fees of $8.2 million, and inflated Combest revenue between 2016 to 2019 and suffering losses of $37 million. The 3 individuals are shadow Director Ng Kwok Fai, Executive Directors Liu Tin Lap & Lee Man To.
“ Hong Kong SFC Secured $24.6 Million Compensation Settlement in Hong Kong Court as Special Dividend from 3 ex-Directors to Pay Shareholders of Hong Kong-Delisted Combest Holdings Limited, Caused Combest to Acquire 2 Subsidiaries in 2016 & 2017 Overvalued by $29 Million, Caused Combest to Take Loans for No Commercial Reasons and Paid Interest & Fees of $8.2 Million, Inflated Combest Revenue Between 2016 to 2019 and Suffering Losses of $37 Million, 3 Individuals are Shadow Director Ng Kwok Fai, Executive Directors Liu Tin Lap & Lee Man Who are Disqualified as Director, Receiver or Managerial Roles for 12 Years, 8 Years & 8 Years Respectively “
Notes:
- In May 2020, the SFC commenced the court proceedings under sections 212 and 214 of the Securities and Futures Ordinance to seek remedies from Ng, Liu and Lee for their wrongdoings. Please see the SFC’s press release dated 21 May 2020.
- In September 2024, the SFC and Combest, Ng, Liu and Lee have reached an agreement to dispose of the court proceedings by way of the Carecraft procedure. Please see the SFC’s press release dated 16 September 2024.
- Two shareholders hold 24.4% of Combest have agreed to forfeit their entitlement to their share of the special dividends, resulting in a 32.3% increase in the special dividends payable to independent public shareholders. The independent public shareholders will receive $0.066 per share, which is 2.75 times higher than the last closing price Combest’s shares before suspension on 29 May 2019.
- The judgement is available on the Judiciary’s website (Case No.: HCCW 118/2020).
Hong Kong SFC Secured $24.6 Million Compensation Settlement from 3 ex-Directors to Pay Shareholders of Hong Kong-Delisted Combest Holdings Limited, Caused Combest to Acquire 2 Subsidiaries in 2016 & 2017 Overvalued by $29 Million, Caused Combest to Take Loans for No Commercial Reasons and Paid Interest & Fees of $8.2 Million, Inflated Combest Revenue Between 2016 to 2019 and Suffering Losses of $37 Million, 3 Individuals are Shadow Director Ng Kwok Fai, Executive Directors Liu Tin Lap & Lee Man To
17th September 2024 – The Hong Kong Securities & Futures Commission (SFC) has secured $24.6 million compensation settlement from 3 Combest ex-directors to pay shareholders of Hong Kong-delisted Combest Holdings Limited, causing Combest to acquire 2 subsidiaries in 2016 & 2017 overvalued by $29 million, caused Combest to take loans for no commercial reasons and paid interest & fees of $8.2 million, and inflated Combest revenue between 2016 to 2019 and suffering losses of $37 million. The 3 individuals are shadow Director Ng Kwok Fai, Executive Directors Liu Tin Lap & Lee Man To. Hong Kong SFC (16/9/24): “The Securities and Futures Commission (SFC) has reached a settlement for three respondents to pay compensation of about $192 million to the Combest Holdings Limited (Combest) for distribution to independent public shareholders of the delisted company to resolve the court proceedings against them in the High Court of Hong Kong by way of a summary procedure (Notes 1 to 3). The three respondents are Mr Ng Kwok Fai, Mr Liu Tin Lap and Mr Lee Man To. The proposed settlement is subject to the approval of the Court, which has fixed the hearing of the parties’ proposals for the settlement on 2 April 2025. If approved, this will set a record compensation amount in the form of special dividends to independent minority shareholders of a delisted company. As part of the settlement, the three respondents will pay Combest compensation of about $192 million. Combest has agreed to distribute the full amount of the compensation to its shareholders through special dividends. Additionally, two shareholders who collectively hold 24.4% of Combest have undertaken to return the special dividends they are entitled to receive for redistribution to independent public shareholders. If the Court approves the settlement, the independent public shareholders will receive $0.066 per share, which is 2.75 times higher than the last closing price of Combest’s shares before suspension (Note 4). The settlement follows an investigation by the SFC commenced in July 2018 which revealed serious concerns about the operations of Combest and the conduct and integrity of its management. To protect the interest of the investing public, the SFC directed The Stock Exchange of Hong Kong Limited (SEHK) to suspend the trading of Combest’s shares on 29 May 2019. Prior to the suspension, Combest shares were last traded at $0.024 per share, with 75.6% of its shares being held by independent public shareholders. On 18 May 2020, the SFC commenced legal proceedings against the respondents. Combest’s shares were delisted by SEHK on 24 December 2020 … … The Court is scheduled to hear the parties’ proposals for the settlement and submissions on the statement of facts on 2 April 2025. Updated information relating to the Court’s decision including the decision on the compensation and the distribution of special dividends will be released in due course. The SFC reminds shareholders and the investing public to exercise caution when dealing in the shares of Combest.”
Further, as part of the settlement, the SFC and the respondents have agreed to a statement of facts, which includes:
- Ng was a shadow director of Combest since 2016, and Liu and Lee who were the only executive directors at the material time, followed Ng’s directions and instructions to operate Combest’s affairs.
- Ng, Liu and Lee caused Combest to enter into acquisitions of two subsidiary groups in 2016 and 2017. Both acquisitions were substantially overvalued by a total of $229 million. The acquisitions enabled Ng to siphon money off from Combest to benefit himself and create the false impression that Combest had a substantial level of operations and assets to warrant the continued listing of its securities.
- The two acquired subsidiary groups were comprised of fictitious or artificial businesses procured by Ng.
- Ng, Liu and Lee also caused Combest to borrow loans and make payments of fees and interests of about $64 million for no commercial reasons.
- Ng, Liu and Lee artificially inflated the revenue of Combest during various accounting periods between 2016 and 2019 and caused Combest to suffer a total loss of over $293 million.
- By reason of the above, Ng, Liu and Lee breached their fiduciary duties owed to Combest.
Notes:
- Combest was listed on the Growth Enterprise Market of SEHK on 8 February 2002.
- On 18 May 2020, the SFC commenced the court proceedings under sections 212 and 214 of the Securities and Futures Ordinance (SFO) in order to seek remedies from Ng, Liu and Lee for their wrongdoings, which have caused losses of more than $293 million to Combest. For details, please see the SFC’s press release dated 21 May 2020.
- The SFC and Combest, Ng, Liu and Lee agreed to resolve the court proceedings by way of a summary procedure commonly known as the Carecraft procedure. The Carecraft procedure refers to the summary procedure sanctioned in the case of Re Carecraft Construction Co Ltd [1994] 1 WLR 172 and adopted by the Court in various instances in respect of proceedings under section 214 of the SFO.
- On 29 May 2019, the SFC directed SEHK to suspend trading in the shares of Combest under section 8(1) of the Securities and Futures (Stock Market Listing) Rules.
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