NEW YORK Hong
Kongs Securities and Futures Commission (SFC) has begun
an official process to wind up a large Hong Kong-based scrap
company after its investigations supported a U.S. research
firms findings that the company had overstated its
operations and revenue.
The SFC had petitioned
Hong Kongs Court of First Instance to liquidate China
Metal Recycling (Holdings) Ltd., a publicly listed company in
Hong Kong, it said July 29.
obtained orders from the court to appoint Borrelli Walsh
Ltd.s Cosimo Borrelli and Jocelyn Chi Lai Man as
provisional liquidators for the recycler.
follow an SFC investigation that found evidence suggesting that
China Metal Recycling had overstated its financial position in
the prospectus used for its initial public offering in 2009 and
in its annual report for that same year.
The SFC alleged that
this was achieved by inflating the size of the companys
business and the amount of revenue generated by its major
subsidiary. The SFC alleged that an overwhelming majority of
the subsidiarys purchases from its three major suppliers
for the financial years ended Dec. 31, 2007, 2008 and 2009,
"were fictitious by escalating amounts in each successive
investigation also found evidence "showing that the suspected
exaggeration of China Metal Recyclings financial
situation remains a current issue that would affect its 2012
financial results, which to date remain unissued."
In January, Glaucus
Research Group California LLC released a 38-page report
questioning China Metal Recyclings publicly declared size
and scope of business.
Citing Chinese import
data and other official information, Glaucus rejected China
Metal Recyclings claim that it was Chinas largest
scrap metals recycling company. China Metal Recycling called
the allegations "completely inaccurate and wholly unfounded,"
but on Jan. 28 asked Hong Kong Exchanges & Clearing Ltd. to
halt trading in its shares (
amm.com, Jan. 31).
The company announced
on March 28 that the Stock Exchange of Hong Kong Ltd. had
imposed certain conditions for trading of the companys
shares to resume. According to the SFC, those conditions
havent yet been satisfied and trading in the
companys shares remains suspended.
The commission will
seek to suspend the powers of the current board of directors at
China Metal Recycling; transfer administrative control of the
company to the provisional liquidators; and prevent any
disposition of the companys property, and any transfer of
shares or alteration in the status of the members of the
company, unless ordered by court.
A hearing has been set
for Aug. 2 to determine whether the court will continue the
appointment of the provisional liquidators.