UPDATE 1-Hong Kong regulator seeks to wind up China Metal Recycling
(Adds statement from securities regulator, shareholder)
HONG KONG, July 29 (Reuters) - Hong Kong's securities regulator appointed a liquidator and applied to a court to wind up China Metal Recycling (Holdings) Ltd, the first time the watchdog has used its powers to try to force a listed company into liquidation.
The Securities and Futures Commission (SFC) said it had evidence suggesting that China Metal Recycling had overstated its financial position in its initial public offering prospectus in 2009 and its annual report for that year.
"The SFC alleges that this was achieved by inflating the size of the company's business and the amount of revenue generated by its major subsidiary," the commission said in a statement.
The company's website describes it as the largest scrap metal recycling company in China based on 2008 revenue. (http://www.chinametalrecycle.com/en/)
China Metal Recycling, whose shares have been suspended since January, said in a statement to the Hong Kong stock exchange that liquidators would "undertake an urgent assessment of the company and its subsidiaries in consultation with the management of the company".
The company, which had a market value of $1.4 billion when the shares were suspended in January, could not immediately be reached late on Monday for comment on the SFC's allegations.
Its single largest shareholder, Wellrun Ltd, said it objected to the regulator's move and had appointed legal counsel to follow up on the case.
The case will be heard on Aug. 2 when the court will decide whether to continue with the appointment of the liquidator, the SFC said.
The suspension of China Metal Recycling's shares in January followed a report from a U.S. company specialising in short-selling, Glaucus Research Group, which challenged the metals company's account of the size of its business.
The SFC said that conditions for resumption of trading had not been satisfied and these had included publishing a clarification that addressed the allegations by Glaucus.
"This is the first time the SFC has applied to the court under section 212 of the Securities and Futures Ordinance (SFO) to wind up a Hong Kong-listed company to protect the interests of the company's shareholders and creditors, and the investing public," the SFC statement said.
For SFC's statement, please see: http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/doc?re f N o = 1 3 P R 6 9
For a statement from China Metal Recycling, see: http://www.hkexnews.hk/listedco/listconews/sehk/2013/0729/LTN20130729246.pdf
The regulator's decision follows six months after the market watchdog proposed new rules that would make banks preparing companies to list on Hong Kong's stock exchange explicitly liable for IPO prospectuses.
This followed a series of accounting scandals at mainland companies listed in the United States that dented investor confidence in U.S.-listed Chinese stocks.
(Reporting by Anne Marie Roantree and Yimou Lee; Editing by Anthony Barker)