Hong Kong is not generally noted for its progressive corporate governance regime. Critics have argued that its weak regulatory system has long favoured powerful tycoons. However, in a rare and dramatic turn of events, Hong Kong's Securities and Futures Commission (SFC) has won its fight at the Court of Appeal to block PCCW chairman Richard Li's $US2.1 billion buyout to take the company private.

The SFC had alleged that the February 4th shareholder vote was rigged after hundreds of insurance agents were given PCCW stock - a practice known locally as “share splitting” - and then turned up to meeting and voted overwhelmingly in favour of the deal which would have seen small shareholders taken out at HK$4.50, substantially less than the principal shareholders who were to be paid a special dividend.

After a week-long hearing, the Appeal Court reversed the original ruling of High Court Judge Susan Kwan who had earlier rejected the SFC’s case. Kwan had branded the regulator’s allegations as “merely suspicion, wholly unsubstantiated by evidence”. According to local sources, a three-judge panel came to a unanimous decision to block the privatization after less than five minutes of deliberation.

SFC chief executive Martin Wheatley said that the Commission was still investigating the matter and would await the court’s written ruling before deciding whether “we need further law reforms”.

Congratulations are due to shareholder activist David Webb who lodged a complaint about the share splitting and vote rigging and acted as the trigger for The Securities and Futures Commission (SFC) to begin its probe.