The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited, has taken disciplinary action against Ms Zhu Ya Ying, a former executive director. Ms Zhu’s actions resulted in a censure from the Stock Exchange, and she has been directed to attend training. The disciplinary action stems from Ms Zhu’s failure to report a guarantee involving an exposure of RMB137.5 million to the other directors on the board, despite being obligated to do so under the Company’s internal control framework. This failure to report the guarantee led to a breach of the Listing Rule requirement to announce the guarantee at the time it was entered into. Additionally, after stepping down as a director, Ms Zhu caused the group to engage in undisclosed transactions that were only discovered by the Company’s auditors in September 2021. The late discovery of these transactions caused a significant delay in the release of the Company’s 2021 interim report, as it had to be revised to reflect the financial impact of these transactions.
This disciplinary action sends important messages to directors and companies. Firstly, directors must ensure that material transactions involving significant financial exposure and risk are promptly brought to the attention of the board. Failure to do so can lead to regulatory breaches and potential consequences. Secondly, the incident highlights the critical importance of adhering to an effective internal control framework. Internal controls should not be bypassed or forgotten, as they serve as a crucial mechanism for ensuring compliance with regulatory requirements, such as the Listing Rule. For further details, the Statement of Disciplinary Action can be accessed on the HKEX website.
Resources: https://www.hkex.com.hk/News/Regulatory-Announcements/2024/240509news?sc_lang=en