SFC obtains court order to disqualify former chairman of Pearl Oriental Oil Limited for six years

25 Jan 2018

The Securities and Futures Commission (SFC) has obtained an order in the High Court to disqualify Mr Fan Di, former chairman, president and executive director of Pearl Oriental Oil Ltd (Pearl Oriental) for defalcation, misfeasance and other misconduct towards the company (Note 1).

The Honourable Mr Justice Godfrey Lam granted the order to disqualify Fan from being a director of or being concerned or involved in the management of any listed or unlisted company in Hong Kong including Pearl Oriental or any of its subsidiaries and affiliates, without the leave of the court, for six years (Notes 2, 3 & 4). 

The SFC’s investigation found that from April 2003 to June 2005, Fan caused Pearl Oriental to invest RMB60 million via an investment company on the Mainland, which would lend the money to companies connected to Fan.  In July 2005, Pearl Oriental’s auditor queried the recoverability of the investment, which was itself objectionable because no written approval had been obtained from the board of Pearl Oriental. Upon demand from Pearl Oriental in August 2005, RMB 64.8 million (purportedly as principal plus interest) was repaid to Pearl Oriental. 

Immediately upon the repayment, Fan caused Pearl Oriental to pay out RMB64.5 million, again without the board’s approval, as an advance for an acquisition of a Mainland logistics business. In obtaining retrospective board approval for the acquisition, Fan failed to disclose important unfavourable findings emerged in the due diligence on the logistic business and to present accurate information about its valuation. As a result, the board approved the payment without taking any reasonable steps to verify the information presented by Fan.

However, the RMB64.5 million was actually transferred to Mainland companies connected to Fan. The acquisition of the logistics business did not proceed in the end and Pearl Oriental incurred a substantial loss of the RMB64.5 million (Note 5).



  1. The company was known as China Merchants DiChain (Asia) Limited at the material times and as Pearl Oriental Innovation Limited at the time the SFC commenced the proceedings.  It was listed on the Main Board of the Stock Exchange of Hong Kong Limited in April 1993.  The company was principally engaged in provision of logistics services on the Mainland at the material times.
  2. Under section 214 of the Securities and Futures Ordinance, the court may make orders disqualifying a person from being a company director or being involved, directly or indirectly, in the management of any corporation for up to 15 years, if the person is found to be wholly or partly responsible for the company’s affairs having been conducted in a manner involving defalcation, fraud or other misconduct.
  3. The SFC has obtained disqualification orders against the three other directors in these proceedings under section 214 of the SFO.  Please see the SFC’s press release dated 24 May 2011
  4. When the investigation commenced in 2007, Fan had left Hong Kong and could not be located to effect service of the proceedings until September 2013. On 26 June 2017, the SFC and Fan agreed to dispose the proceedings by Carecraft procedure which involves the submission by both parties to the court of an agreed statement of facts upon which the court will assess what order should be made.
  5. In 2007, Pearl Oriental obtained judgment against Fan (and other related parties including two other former executive directors of Pearl Oriental) for the sum of RMB64.5 million.  
  6. A summary of the material events and the allegations are posted on the SFC’s website (www.sfc.hk).  Fan is the “Other Director” referred therein.

Page last updated : 25 Jan 2018