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The importance of being candid – Hong Kong Stock Exchange censures debt issuer and its authorised representative

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Authored by: Kevin Tong, Icarus Yuen and Christine Li

On 19 January 2022, The Stock Exchange of Hong Kong Limited (Exchange) published a disciplinary action against Yihua Overseas Investment Ltd (Issuer) (being an issuer whose debt securities were previously listed on the Exchange) and its authorised representative, Ms Liu Shaoxiang (Ms Liu).

The Exchange publicly censured the Issuer for (i) its delay in announcing information including inside information to avoid a false market in relation to its debt securities; (ii) its failure to apply for a trading suspension; and (iii) its delay in providing information requested by the Exchange. The Exchange further censured Ms Liu for her failure to fulfil her responsibilities as an authorised representative of the Issuer.


The Issuer’s US-dollar denominated notes (Notes) were listed on the Exchange under Chapter 37 of the Rules Governing the Listing of Securities on the Stock Exchange (Listing Rules) in October 2017. Ms Liu, being the sole director of the Issuer, was appointed as the authorised representative of the Issuer.

Pursuant to the terms of the Notes, interest was payable semi-annually each year until 23 October 2020 (Maturity Date). The Issuer failed to pay interest due and such non-payment continued through the applicable grace period, resulting in an event of default under the Notes in May 2020. The Exchange directed a trading suspension of the Notes with effect from 4 August 2020, which continued until the delisting of the Notes upon its maturity. The Issuer did not announce its failure to pay interest on the due date and the event of default until November 2020, which was after the delisting of the Notes upon maturity and commencement of the Exchange’s investigation. The Issuer did not apply for a trading suspension for the Notes either.

The Exchange made repeated attempts since July 2020 to contact the Issuer through Ms Liu to request information in relation to the status of payment of interest under the Notes. However, the Issuer did not respond until November 2020.

Findings of the Listing Committee

The Listing Committee of the Exchange found that the Issuer was in breach of the following Listing Rules:

  1. Rule 2.12A – for its delay in providing information requested by the Exchange;

  2. Rule 37.47B(a) and Rule 37.47(b) – for its delay in announcing its inability to pay interest on the due date and the occurrence of the event of default (which constituted inside information and information necessary to avoid a false market in the listed debt securities); and

  3. Rule 37.47C – for its failure to apply for a trading suspension.

In addition, the Listing Committee also concluded that Ms Liu was in breach of Rule 3.06(1) for her failure to be the principal channel of communication between the Exchange and the Issuer.

Consequences of breach of the Listing Rules

While the disciplinary action in the present case only involves public censures against the Issuer and its authorised representative, it is worth mentioning that in addition to public censures, the Listing Committee may also impose other sanctions where there is a breach of the Listing Rules, which include, among others:

  • other reputational sanctions – including issuance of a private reprimand, a public statement involving criticism, a public statement that, in the opinion of the Exchange, the occupying of the position of a director or senior management may cause prejudice to the interests of investors, and in the case of serious or repeated failure by a director to discharge his responsibilities under the Listing Rules, a public statement that in the Exchange’s opinion the director is unsuitable to occupy a position as director or within senior management of a named listed issuer or any of its subsidiaries; and

  • remedial actions – including denial of facilities of the market to a listed issuer for a specified period, prohibition of dealers and financial advisers from acting for the listed issuer and suspension or cancellation of listing of the listed securities.

Imposition of sanctions on individuals occupying the position of a director, senior management or authorised representative of listed issuers may have a negative bearing on their suitability to act as directors of other listed issuers.

Consequences of breach of the SFO

It should also be noted that failure to disclose inside information (i.e. specific price-sensitive information not generally known to the market) in relation to a listed company as soon as reasonably practicable also constitutes a breach of Part XIVA of the Securities and Futures Ordinance (SFO).

The SFO also imposes a personal obligation on the officers of listed companies to take all reasonable measures to ensure the company’s compliance of the disclosure requirements, and the officers may be personally liable if the listed company is in breach of the disclosure requirement as a result of his or her intentional, reckless or negligent conduct.

A range of sanctions may be imposed on the listed company and its officers which are in breach of the disclosure obligations under Part XIVA of the SFO, including, among others, a fine of up to HK$8 million, disqualification of the directors and “cold shoulder” order.


This case serves as a timely reminder of debt issuers’ continuing obligations under the Listing Rules. It showcases the importance of compliance with the relevant obligations, including the obligation to provide the Exchange and the public with information in relation to listed securities in a timely manner.

While the listing of debt securities under Chapter 37 of the Listing Rules is a streamlined listing platform for debt securities offered to professional investors only, issuers are reminded of their continuing obligations[1] under the Listing Rules following listing of their debt securities, non-compliant of which may result in disciplinary actions and sanctions imposed by the Listing Committee on the issuers and their directors, senior management or authorised representatives, as well as potential corporate and/or personal liabilities under the SFO.

[1] For a full list of the continuing obligations under Chapter 37 of the Listing Rules, please refer to Rules 37.44 to 37.53.

Key Contacts

Kevin Tong

Partner | Corporate Finance

Email or call +852 2825 9229

Icarus Yuen

Partner | Corporate Finance

Email or call +852 2825 9797

Christine Li

Consultant | Corporate Finance

Email or call +852 2825 9303

Related Services and Sectors:

Capital Markets, Debt

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