Hong Kong Securities and Futures Commission and Hong Kong Stock Exchange censure former Universal Star directors for prospectus non-disclosure of RMB49 million loans

The Hong Kong Securities and Futures Commission (SFC) announced that an enforcement collaboration with the Stock Exchange of Hong Kong Limited resulted in disciplinary action against Mr Lu Qingxing and his son, Mr Lyu Zhufeng, former directors of Universal Star (Holdings) Limited, for failing to procure the disclosure of material information in the company’s IPO prospectus. Based on the SFC’s investigation findings, the Exchange imposed a Prejudice to Investors’ Interests Statement and a censure. The SFC’s investigation focused on the non-disclosure of 13 outstanding loans involving a Universal Star subsidiary as co-borrower or guarantor to the sponsor or other directors at the time of the May 2019 listing. The loans totalled approximately RMB49 million, were taken out by Mr Lu between April 2017 and April 2019, and at least approximately RMB44 million was found to have been paid to him; the loans remained outstanding as of August 2020 and were not disclosed as material financial liabilities in the prospectus. The pair also pledged a subsidiary property to secure the loans after the IPO without the knowledge or approval of other directors, or independent shareholders as required by the Listing Rules, and failed to manage conflicts of interest given Mr Lu’s personal benefit from the loans and pledge.