Hong Kong Exchanges and Clearing Limited’s wholly-owned subsidiary, The Stock Exchange of Hong Kong Limited, announced a disciplinary action against two former directors of Universal Star (Holdings) Limited (Delisted, Previous Stock Code: 2346). The Exchange imposed both a Prejudice to Investors’ Interests Statement and a censure on the former non-executive director, identified as Mr. Lu, and the former executive director, identified as Mr. Lyu.

Between April 2017 and April 2019, Mr. Lu borrowed a total of approximately RMB49 million through 13 transactions from a lender, placing a major operating subsidiary of Universal Star (Holdings) Limited as a co-borrower or guarantor. Nearly all proceeds went to Mr. Lu, with only RMB2 million briefly transferred to Mr. Lyu before being passed on to the subsidiary. The loans remained largely outstanding at the time of the company’s listing in May 2019, representing a significant financial liability not disclosed to the sponsor or other directors, rendering the prospectus materially inaccurate.

In August 2020, a property of the subsidiary—housing production facilities and material assets—was pledged to secure RMB37 million of the loans at the lender’s demand. Both Mr. Lu and Mr. Lyu, aware of this arrangement, did not inform the other directors. This transaction fell under major and connected transaction rules, yet no required announcement, circular, or shareholder approvals were obtained, and no consultation was sought with the compliance adviser.

The Listing Committee determined that Mr. Lu and Mr. Lyu breached several Listing Rules by failing to disclose the loans and pledge, neglecting to avoid conflicts of interest, and not procuring the company’s compliance with disclosure and approval obligations. Both individuals accepted the findings and sanctions, which include the view that, had they remained on the board, their continuation would have been prejudicial to the interests of investors. The Exchange confirmed that these sanctions apply only to Mr. Lu and Mr. Lyu and not to any other past or present directors.