The Zhitong Finance App learned that on October 6, the Hong Kong Stock Exchange announced that it made a statement and reprimand against Mr. Lee Siu-bin, the former financial director and company secretary of China and Hong Kong Petroleum Limited (00632), harming investors' rights and interests. Mr. Lee was found to have seriously and clearly failed to perform his duties and responsibilities as Chief Financial Officer and Company Secretary, which led to a material misstatement in the annual results of CNPC (the Company) for the year ended 31 December 2023, which in turn led to the company's violation of Rule 2.13 (2) of the Listing Rules.
The Company and its subsidiaries (the Group) are mainly engaged in oil and gas extraction and trading. The group holds mining rights for several US oil and gas fields under leases granted by local US government departments. In November 2022, the government department terminated part of the lease (termination incident), and the assets involved represented approximately 40% of the Group's total assets in 2022.
Mr. Lee was aware of the termination as early as January 2024, when he received a copy of an email from an American employee referring to the termination. Mr. Lee claimed to be carrying out his duties, and he forwarded the email to a director of the company. However, as stated in the email, the employee tried to contact the director regarding the termination and other urgent matters, but was unable to get in touch with him or receive a response from him.
Despite the obvious importance of ending the incident, Mr. Lee:
No action was taken to understand the circumstances of the termination; no termination was reported to the Board of Directors, Audit Committee or the Company's auditors;
Even though the auditor stated during the review of the company's 2023 financial statements that it had difficulties in verifying ownership of the oil wells in the lease agreement, Mr. Lee remained silent on the matter; and continued to regard the terminated lease as an asset of the group when preparing the company's 2023 consolidated financial statements, and prompted or allowed the company to publish the 2023 annual results and annual report without disclosing the termination event or reflecting its impact.
The Board learned of the termination incident in August 2024. On September 27, 2024, the company announced a return to its 2023 full year results, disclosing that it did not remove such terminated leases from the published balance sheet, resulting in the group's total assets being overvalued by 58.1% on December 31, 2023. As a result, the Company's 2023 annual results and annual report were seriously untrue, incomplete and misleading, in violation of Rule 2.13 (2) of the Listing Rules.
The Hong Kong Stock Exchange determined that Mr. Lee was liable for the company's violation of the Listing Rules under section 2A.10B (3) of the Listing Rules. The Exchange believes that Mr. Lee's acting as a director or senior management member of the company or any of its subsidiaries may harm investors' rights.