Shanghai Henlius censured, former director criticized over IPO proceeds

The Stock Exchange of Hong Kong Limited has censured Shanghai Henlius Biotech, Inc. and criticized its former executive director and chief executive, Dr Scott Shi-Kau Liu, for breaches of Listing Rules. The company, listed on September 25, 2019, raised net IPO proceeds of HK$3,147m. The disciplinary action stems from an Investment Management Agreement (IMA) signed by the company’s former chief financial officer on the listing date, engaging AMTD Global Markets Limited to invest $117m of IPO proceeds. This use of funds did not align with the intended uses detailed in the IPO prospectus.

Dr Liu approved a $3.5m management fee for the IMA without fully examining the agreement or bringing the matter to the board. This resulted in the company failing to disclose the IMA in its prospectus or other listing documents, not consulting its compliance adviser, and not announcing the IMA in a timely manner. The company also failed to disclose the IMA’s amount and effect in its FY2019 and FY2020 annual reports. AMTD subsequently invested the funds in bonds and promissory notes, with the company recovering $30,640,000 during FY2020-2022 and a further $20,000,000 in FY2023.

As a prerequisite for any future directorships on the Exchange, Dr Liu has been directed to complete 26 hours of training on regulatory and legal topics. Both the company and Dr Liu did not contest the breaches and accepted the sanctions and directions.