SFC sanctions Daqing Dairy and its directors

27 Nov 2013

The Securities and Futures Commission (SFC) has issued sanctions against Daqing Dairy Holdings Limited (Daqing Dairy) and its directors, Mr Wang De Lin and Mr Stephen Chiang Chi Kin for breaching the Code on Takeovers and Mergers (Takeovers Code) (Note 1).

The Takeovers Executive (Executive) has imposed a Cold Shoulder Order denying Wang direct or indirect access to the Hong Kong securities markets for 24 months from 28 November 2013 to 27 November 2015.

The Executive also publicly censures Daqing Dairy, Wang and Chiang in relation to their conduct in this matter.

At all material times Wang and Chiang were respectively Daqing Dairy’s only executive director and only independent non-executive director.

On 18 April 2013, Daqing Dairy announced jointly with Radiant State Limited (Offeror) that the Offeror had acquired a 52.16% interest in Daqing Dairy from its former controlling shareholder and that the Offeror would make a general offer for the shares in Daqing Dairy pursuant to Rule 26.1 of the Takeovers Code. The Offeror posted an offer document to shareholders on 7 June 2013.

Despite repeated requests by the Executive to do so, Daqing Dairy and its directors failed to issue an offeree board circular to shareholders in respect of the general offer as required under Rule 8.4 of the Takeovers Code (Note 2).

The failure to despatch the offeree board circular within the time prescribed in Rule 8.4 prejudiced the interests of Daqing Dairy shareholders as well as the investing public. As Daqing Dairy failed to provide its shareholders with its latest corporate and financial information, the board’s recommendation and the advice of an independent financial adviser with respect to the general offer as required by the Takeovers Code, shareholders were unable to reach a properly informed decision on the general offer as envisaged by the Takeovers Code.

Daqing Dairy, Wang and Chiang accept that they have breached Rule 8.4 and have agreed to the disciplinary action against them under section 12.3 of the Introduction to the Takeovers Code. Their failure to issue a circular in accordance with Rule 8.4 of the Takeovers Code constitutes a breach of a fundamental provision of the Takeovers Code.

The Executive is imposing severer sanctions against Wang than the other two parties to reflect his overall role in the breach of Rule 8.4 of the Takeovers Code. At all relevant times, Wang was the only executive director of Daqing Dairy. He had a clear responsibility to ensure that Daqing Dairy fully complied with the Takeovers Code.

The sanction against Chiang reflects his role in the breach and the fact that he failed to take sufficient action to ensure that the offeree board circular was issued in compliance with Rule 8.4.

The SFC takes this opportunity to remind practitioners and parties who wish to take advantage of the securities markets in Hong Kong that they should conduct themselves in matters relating to takeovers and mergers in accordance with the Takeovers Code. If they do not, they may find by way of sanction, that the facilities of such markets are withheld in order to protect those who participate in Hong Kong’s securities markets.

A copy of the Executive Statement and related Takeovers Code provisions and the Cold Shoulder Order can be found in the "Takeovers and Mergers Executive Statements" section of the SFC website at www.sfc.hk.



  1. Daqing Dairy’s shares are listed on the Main Board of the Stock Exchange of Hong Kong Limited. Daqing Dairy is principally engaged in the production, marketing and sales of dairy products and the operation and management of ecological farm and related business in the People’s Republic of China.
  2. The purpose of Rule 8.4 of the Takeovers Code is to give shareholders of an offeree company sufficient information, advice and time to consider an offer. It reflects General Principle 5 of the Takeovers Code which provides that shareholders should be given sufficient information, advice and time to reach an informed decision on an offer.

Page last updated : 27 Nov 2013