Hong Kong regulator moves to liquidate China Metal Recycling
China Metal Recycling (CMR), which once claimed to be China’s biggest scrap company, has been ordered into liquidation by Hong Kong’s High Court.
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The firm’s single biggest shareholder has objected to the order petitioned by the Securities and Futures Commission (SFC), and said it had appointed a lawyer to “follow up” the case.
CMR’s shares were suspended from the Hong Kong Stock Exchange six months ago as the company prepared to answer claims from a US research house about the size and scope of its business.
The SFC also then launched an investigation, and on Friday July 26 obtained the court order for the company to be wound up.
The regulator said it had found evidence that CMR’s financial position at the time of its listing was “overstated”, and that its finances “remain a current issue that would affect its 2012 financial results, which to date remain unissued”.
The regulator applied to Hong Kong’s Court of First Instance to wind up the company, which was valued at HK$1.443 billion ($186 million) at its initial public offering in June 2009.
“This is the first time the SFC has applied to the court under section 212 of the Securities and Futures Ordinance (SFO) to wind up a Hong Kong-listed company to protect the interests of the company’s shareholders and creditors, and the investing public,” the regulator said.
In response, Wellrun – the company which holds a 52.1% stake in CMR said on Monday July 29 that it “objects the SFC’s application to wind up the group, and believes this is against the benefits of the group’s shareholders. The company has appointed legal counsel to follow up the case”.
The regulator, through orders from the Hong Kong High Court, appointed Cosimo Borrelli and Jocelyn Chi Lai Man, both of Borrelli Walsh Ltd, as provisional liquidators for CMR.
They are to take possession of the assets of the company, investigate its affairs and make void any disposition of the company’s property, according to SFC’s announcement on Monday July 29.
The case will be heard on August 2 when the court will decide whether to extend the appointment of the provisional liquidators. CMR may appear and will have an opportunity to address SFC’s allegations and the orders made against it, the regulator said.
CMR claims to be the biggest scrap company in China, but trading of its shares has been voluntarily suspended since January 28 2013 after US firm Glaucus Research made various claims about CMR. These included that its claim to be China’s biggest scrap company was not supported by official data.
Wellrun had agreed in January 2013, a few days before the Glaucus claims, to sell 29% of its stake in CMR to China Energy Conservation & Environmental Protection Group. But that deal did not go ahead following the suspension.