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China’s Former Richest Man Banned By Hong Kong Business

Chinese Entrepreneur Li Hejun, who once briefly held the title of China’s richest man, has just been banned from Hong Kong’s Business world. A Hong Kong court has disqualified Li Hejun from being involved with the management of any Hong Kong unlisted or listed company or being a director for eight years. He was found to be negligent and incompetent in his duties as chairman for the Hanergy Thin Film, a Hong Kong-listed company.

Li Hejun rose to fame in 2002, after his privately owned Hanergy Holdings Group (which owns 74.8 percent of the listed unit), won the right to build the 2400 megawatt, Jinanqiao hydro-electric power plant (costing 20 billion yuan) in Yunnan province. The 48 year old native of Heyuan, Guangdong province was famous in the power sector,  not only because his company was the first and only privately owned firm in the country to be allowed to invest in a hydropower project, but also because he managed to raise funds and complete his project by the year of 2012.

He first struck his pot of gold with the hydro investment, his journey into the solar power sector seven years ago, along with dealings between Hanergy Thin Film and Hanergy Holdings left a deep scar on his entrepreneurial resume.

Hanergy is a Chinese, multinational, privately held, renewable energy company, headquartered in Beijing, China, that was initially founded in the year of 1994 by Li Hejun. It was active in wind, hydropower and solar generation.

The Hanergy Thin Film Company made headlines in early 2015, by losing almost half of its market value in less than 30 minutes. The amount was a rough $40 billion. Li is also the founder of the parent company, Hanergy. About a week after the company made international business headlines, the Hong Kong Securities and Futures Commission suspended Hanergy Thin Film’s shares indefinitely, after discovering foul play while conducting an investigation into the business.

Hanergy Holding Group
  • The Hanergy Holding Group owns a wind farm, hydropower plants, some solar assets and a controlling stake in the Hanergy Thin Film Power.
  • Hanergy Thin Film, a solar power equipment arm (that’s Hong Kong-listed), has halted trading after a steep drop in the stock in 2015.
Li Hejun, the Richest Man in China
  • The company’s erratic loss of funds brought to light, the complicated relationship between Hong Kong-listed firms and their Chinese Trading Companies.
  • The relationship had an unconventional arrangement which allowed private mainland companies to access finances from the Hong Kong market, without being subject to any disclosure rules.
  • Before their inevitable crash in 2015, Hanergy’s shares soared for more than 600 percent and the company was valued at over $45 billion, making Li Hejun the richest man in China at the time.
Reason for Ban 

The company’s peak and downfall gave rise to suspicions of market manipulation amongst regulators and investors. There was concern about why investors were sending the stock price up when the company’s model wasn’t a new one (Hanergy Thin Film said that 60 percent of its sales were from its parent company, the Beijing-based Hanergy Holding.) More suspicions arose when Li Hejun himself raised his own bet about shares of his solar company taking a tumble down, just five days before the downfall of the company. As part of an investigation into the trading at Hanergy, Li agreed to be prohibited from being on the board of directors in Hong Kong Business.

There hasn’t been a lot of explanation as to what exactly happened, and the shareholders might never get their investments back – or a clear answer. There is no guarantee that the company’s shares on the stock exchange will resume. The SFC (Securities and Futures Commission) also commented that they couldn’t assure that resumption of trade will be granted. 

Results Of The Ban

The SFC’s case against the Hanergy Company also resulted in a court ruling in four suspensions of non-executive directors from management that ranges from 3 to 4 years for incompetence and, “a marked indifference to their responsibilities,” according to the SFC. The case against Hanergy brought to the court by the SFC, also focused on undisclosed loans of approximately $137.67 million (900 million yuan) to an unlisted mainland parent firm (Hanergy Holding) by a mainland subsidiary. Hanergy Holdings has been ordered by the court to pay all the due receivables that arose from two big solar panel production equipment sales during the years of 2010 and 2011. A contract that guarantees the secure payment is also being sought after. For the SFC to consider letting Hanergy resume trading, they must meet these conditions as well as submit detailed disclosures on the company’s activities, assets, business, liabilities, financial performance, and prospects.

It wasn’t just incompetence that Li was found guilty of. Li was also found guilty of a clear conflict of interest. He failed to handle the situation with reasonable care and diligence, resulting in a further loss for the company. Li Hejun is currently the 135th richest person in China with a net worth of $1.9 billion as of March 2017.

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