The SFC of Hong Kong initiates legal proceedings against Jing Jiu Kang Liao (00648), former directors, and de facto directors.

The Securities and Futures Commission of Hong Kong has initiated legal proceedings in the original court under section 214 of the Securities and Futures Ordinance, seeking a disqualification order against seven former directors of Tianjin Jiuyun Kangliao (00648), including Chen Jiazhong, former Chairman and Executive Director, as well as two former factual directors Cao Guizi and Xu Jiahua, for suspected breach of fiduciary duty. The Securities and Futures Commission of Hong Kong stated that Cao and Xu failed in their duty towards the company by (i) not disclosing their status as factual directors; (ii) issuing false and/or misleading information in the announcements regarding the independence of the selling party and its beneficial owners; and (iii) putting themselves in a conflict of interest between personal interests and their responsibilities to Tianjin Jiuyun Kangliao. The seven former directors are: former Chairman and Executive Director Chen Jiazhong (male); former Executive Directors Zhang Weijun (male) and Wang Jianguo (male); as well as former Independent Non-executive Directors Chen Yiping (male), Hu Xuezhen (female), Lin Zhenhao (male), and Tang Zhuomin (male). The two former factual directors are Cao Guizi (male) and Xu Jiahua (male). This is the second legal proceeding initiated by the Securities and Futures Commission of Hong Kong against Cao under section 214 of the Securities and Futures Ordinance. After investigation, the Securities and Futures Commission of Hong Kong found that Cao and Xu were involved in the management and decision-making of the company's business or affairs between August 2014 and June 2016, and therefore were considered factual directors of Tianjin Jiuyun Kangliao. In June 2016, Tianjin Jiuyun Kangliao's wholly-owned subsidiary acquired a 9.9% stake in NEW RAY MEDIC International Holdings Limited for approximately HK$79 million from an indirect wholly-owned subsidiary of TOWN HEALTH Group Limited (Healthy). Cao and Xu were directors of Healthy at critical times, with Cao also being a director of Healthy Pharmacy. An announcement was made by Tianjin Jiuyun Kangliao on June 23, 2016, regarding the above-mentioned share acquisition transaction, stating that (i) the selling party and its beneficial owners were independent third parties separate from the company and its related parties; (ii) the price of the transaction was determined after fair negotiation between Tianjin Jiuyun Kangliao Group and the selling party; and (iii) benefits could be obtained from the share acquisition transaction. However, the Securities and Futures Commission of Hong Kong's investigation revealed that the transaction was not conducted after fair negotiation between Tianjin Jiuyun Kangliao Group and Healthy Pharmacy, and the company had no intention to realize the benefits of the transaction as stated. The seven former directors of Tianjin Jiuyun Kangliao also breached their duty towards the company by issuing false and/or misleading information in the above-mentioned announcement. The Securities and Futures Commission of Hong Kong has also sought an order from the court in this legal action for Tianjin Jiuyun Kangliao to disclose the court's ruling in the legal proceedings, informing shareholders that Cao and Xu were former factual directors of the company, and that the company had issued false and/or misleading information in the announcement.