Hong Kong’s Securities and Futures Commission (SFC) has obtained an order from the Court of First Instance requiring Mr Zhang Wei, a former executive director of Coolpad Group Limited, to pay HK$4 million in compensation to Coolpad for his role in a series of transactions which caused financial loss to the company.

Zhang was also disqualified for a period of five years from being a director, liquidator, receiver or manager of, or being involved in the management of, any listed or unlisted corporation in Hong Kong. He was ordered to pay the SFC’s costs in the legal proceedings.

Meanwhile, the SFC’s legal proceedings against six former directors of Coolpad – Jia Yueting, Jiang Chao, Liu Jiangfeng, Liu Hong, Chan King Chung and Xie Weixin – are ongoing.

The SFC found that between 2016 and 2017, Coolpad and its subsidiaries entered into five transactions that resulted in approximately RMB2 billion being provided, allegedly as short-term financing, to entities held and/or controlled by the company’s former chairman and substantial shareholder. These transactions were undertaken without proper approval or disclosure to shareholders, causing Coolpad to suffer significant losses of approximately RMB84 million.

The Court ordered Zhang to compensate Coolpad for part of the loss the company suffered. He admitted that he breached his duties by, among other things, failing to act in good faith, not acting in the best interests of Coolpad, and not exercising independent judgment when approving two of the five transactions and authorising remittances for three.

In addition, he failed to ensure that Coolpad disclosed in a timely manner its auditors’ concerns regarding the transactions and the company’s ability to continue as a going concern. He further failed to exercise reasonable care, skill and diligence when investigating the transactions as a member of the independent board committee of Coolpad at the material time.