The District Court has jailed two executives for 24 months for conspiring to defraud minority shareholders of a listed company in relation to its acquisition.

Gong Beiying, 31, former director of Shanghai Merchants Holdings and Shanghai Land Holdings, and Tsoi Hon-chung, 55, former Ying Wing Holdings chairman, were found guilty on one joint charge of conspiracy to defraud.

Gong was further convicted on one count of false accounting.

Ying Wing was a listed company whose main business involved processing raw fabric. In 2001 Tsoi wished to sell his interest in Ying Wing, and asked his financial controller to find a buyer. The financial controller contacted Gong, who then approached business executives Chau Ching-ngai and Sandy Mo.

Gong told Tsoi that Chau and Mo were only interested in acquiring the "shell", or listing status, of Ying Wing, not its fabric business.

On behalf of Chau and Mo, Gong promised Tsoi that arrangements would be made for him to re-acquire the fabric business at no expense one year after the Ying Wing takeover.

They also agreed that the Ying Wing "shell" would be sold at $61.8 million, or $0.418 per share of Ying Wing, but they falsely represented to the public and the regulators that the consideration also covered the fabric business. 

Throughout the acquisition, the fact that the fabric business of Ying Wing would be returned to Tsoi for free was concealed from the company's minority shareholders, who were also led to accept a consideration lower than that they might otherwise had been advised to accept by the company's Independent Board Committee.

The offer of $0.418 per share was subsequently made to Ying Wing's minority shareholders. After the takeover, Ying Wing was renamed Shanghai Merchants.

In February 2003, Shanghai Land became the owner of a plot of land in Wu Zhong Road in Shanghai.