Hontex - A settlement of convenience?

By granting a consent order on 20 June 2012, the Court of First Instance initiated relief for some 7,700 long-suffering shareholders of Hontex International Holdings Company Limited whose shares had been suspended from trading on the Stock Exchange of Hong Kong since 29 March 2010 at the request of the Securities and Futures Commission (SFC) on the basis of material misstatements in its listing prospectus, which is a market misconduct. The authors submit that the settlement between the company and the SFC is not on a firm legal footing as signifi- cant doubts prevail over whether the use of sections 213 and 298 of the Securities and Futures Ordinance will withstand the test of a fully ventilated case in court. In addition, the authors question whether the share repurchase scheme by Hontex actually compensates the proper class of investors.