The government on Wednesday invoked rarely used powers under the Companies Ordinance to launch an investigation of the financial affairs of Next Digital.
The company, which has seen several senior executives charged with national security offences, closed its flagship Apple Daily newspaper last month after officials froze some of its assets.
Announcing the decision on Wednesday, Financial Secretary Paul Chan said he made the move in the public interest, adding that he has "grave concerns" over potential mismanagement of the listed firm.
"In particular the involvement of its officers, in the alleged criminal offences, and/or misconduct and the officers' failure in their duty to prevent this from happening, and whether officers of Next Digital Limited had taken reasonable and adequate steps to protect the interest of its shareholders and creditors," he told reporters.
A senior accountant and non-executive director of the Securities and Futures Commission, Clement Chan, has been appointed to head the probe.
He has been given six months to investigate and submit a report to the government.
The Financial Secretary said the inspector will be given wide-ranging powers and will be looking into various areas.
These include, whether Next Digital had intended to defraud any creditors or conducted its affairs for any fraudulent or unlawful purposes; whether the company was serving the personal interests of its senior officers to the detriment of its public shareholders and whether full and timely disclosures were made.
The last time the government invoked such investigative powers under the Company Ordinance was in 1999, when a former official of the UK's Financial Services Authority was appointed to look into the collapse of the Peregrine group of companies during the Asian Financial Crisis.
Separately, the Securities and Futures Commission said it has been making inquiries into Next Digital.
In a statement, the SFC said it will coordinate closely with the inspector while carrying on with its own probe into the firm.
Shares of Next Digital have been suspended from trading since June 17, following the arrests of its senior executives on national security charges.
The company later announced that it had to delay the announcement of its annual results, explaining that its independent auditor needed more time to assess the financial impact of the police investigations.
The Hong Kong Exchanges and Clearing has also asked the company to prove that it still qualifies to be listed on the local bourse.
Govt appoints investigator to probe Next Digital
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