Next Digital suspends trading after Jimmy Lai’s assets freeze

2021.05.17
Next Digital suspends trading after Jimmy Lai s assets freeze

Next Digital Limited (282) has halted trading on Monday morning, pending the release of a statement regarding the Hong Kong Security Bureau’s move to freeze assets and shareholdings in the company held by controlling shareholder Jimmy Lai. The statement will release inside information for the company.

The Security Bureau announced last Friday it has frozen the assets of the founder of Next Digital Limited Jimmy Lai, who is charged with collusion with a foreign country under Beijing’s national security law for Hong Kong. The frozen assets included Lai’s 71.26% of shares in Next Digital Limited and funds in local bank accounts of three companies Lai owns.

Chief Executive Officer of Next Digital Limited, Cheung Kim-hung, stressed that the freeze did not affect Next Digital’s bank accounts, and would not influence the financial situation or operations of either Apple Daily or Next Digital.

Since the halt in trading was announced, the stock price of the media company Most Kwai Chung Limited (1716) soared 14.7% to HK$1.01 (US$0.13) when the market opened on Monday morning, before it doubled to HK$2. The latest stock price is at HK$1.38, with a trading turnover of HK$60.6 million (US$7.8 million).

According to consultations with legal and securities professionals, the Secretary for Security may apply to extend the period of the freeze to over two years. If Lai is convicted, his shares in Next Digital Limited may be confiscated.

Schedule 3 of the national security law stipulates that the validity period of the notice freezing assets must not exceed two years unless an application for restraint order, charging order, confiscation order or forfeiture order has been made in relation to the property.

But the Secretary for Security may make an application to the Court of First Instance for extending the validity period and it would be granted if the court is satisfied that the investigation of the offence endangering national security could not reasonably have been completed before the notice expires. The Secretary may further apply if necessary.

Legal professionals said while freezing assets for a period of two years is considerably long, the Bureau may apply for an extension citing ongoing investigation. As the legal proceedings could take up to years, the defendant’s assets would be frozen by the authorities indefinitely until there is a ruling on the related charges.

Schedule 3 of the national security law also states that if a defendant is convicted of an offence under the legislation and the court determines the defendant has benefited from the offence, the court must determine the amount to be recovered in the defendant’s case. The Security for Justice or an authorized officer may apply for a confiscation order to recover the amount.

Legal professionals pointed out that similar practices are adopted in offences under the Organized and Serious Crimes Ordinance, including money laundering. Securities professionals said that confiscated company shares are usually sold publicly in the market, which will determine who becomes the largest shareholders of Next Digital Limited.

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