garcade| Pay back the money and rectify it! Nine companies were "named" by regulators

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On the evening of May 10th, nine companies, including ST Modern (rights protection), ST Red Sun, ST China Railway (rights protection), * ST Zhongli (rights protection), ST Haoyuan (rights protection), * ST Shen Tian (rights protection), ST Changkang (rights protection), ST three saints (rights protection), and * ST ICT (rights protection), have successively disclosed the announcement that they have been ordered to take corrective measures.

A reporter from the Shanghai Securities News combed and found that the reasons for the above-mentioned nine companies being ordered to rectify and reform were all "non-operating occupation of large amounts of funds," ranging from hundreds of millions of yuan to more than 3 billion yuan. In this regard, the supervision requires them to collect the occupied funds within six months.

At the same time, the Shanghai and Shenzhen exchanges quickly issued a letter of concern, requiring listed companies, controlling shareholders and actual controllers to effectively rectify and put in place to safeguard the interests of listed companies and minority shareholders.

Photo Source: company announcement

According to the relevant rules of the Shanghai and Shenzhen stock exchanges, if the company fails to collect the occupied funds within six months in accordance with the requirements of the order and correction, the exchange will suspend the trading of the company's shares; if the rectification is not completed within two months after the suspension, the exchange will implement a delisting risk warning for the company's stock trading; if the rectification has not been completed within the next two months, the exchange will decide to terminate the company's stock listing and trading.

Market analysts pointed out that the intensive efforts of regulators are a concrete manifestation of the implementation of the Central Financial work Conference and the new "National Nine articles," releasing a clear signal of "strict supervision and strict supervision." it also means that the "sniper war" on the occupation of funds under the new delisting rules has officially begun.

The maximum illegal occupation of funds is more than 3 billion yuan.

In terms of the amount of funds illegally occupied by controlling shareholders, ST Changkang and ST Red Sun were occupied as high as 34% respectively.Garcade85 million yuan and 2.884 billion yuan, accounting for 93.44% of the latest audited net assets, 328.17% of the latest audited net assets, ST China Railway and other occupied funds are also more than 1 billion yuan.

Taking ST Changkang as an example, Jiangsu Securities Regulatory Bureau pointed out that after investigation, Runfa Group, the controlling shareholder of ST Changkang, and its related parties had the behavior of non-operating occupation of ST Changkang funds. According to the ST Changkang announcement, as of May 6, 2024, the balance of funds occupied was 3.485 billion yuan, accounting for 93.44% of the net assets at the end of 2023.

Photo Source: company announcement

According to the relevant regulations, Jiangsu Securities Regulatory Bureau decided to take administrative regulatory measures to order corrections against ST Changkang and Runfa Group, which were recorded in the integrity files of the securities and futures market. At the same time, Jiangsu Securities Regulatory Bureau requires Runfa Group and its related parties to return all occupied funds within six months from the date of receipt of this decision, and submit a written report to Jiangsu Securities Regulatory Bureau after the completion of rectification and reform. to achieve genuine rectification and comprehensive rectification (including the return of funds in the previous period).

Take another look at ST Red Sun, on September 5, 2023, the China Securities Regulatory Commission issued to ST Red Sun "Administrative penalty decision" shows that the investigation by the China Securities Regulatory Commission found that ST Red Sun did not disclose the related transactions of non-operating funds occupied by the controlling shareholders and their related parties in accordance with the regulations, and there were false records in the relevant announcements, the controlling shareholders and their related parties did not substantially return the occupied funds.

Photo Source: company announcement

According to the ST Red Sun announcement, as of May 7, 2024, the controlling shares of Southeast Yinong Group and its affiliated Fang Hong Sun Group and Jiangsu National Star occupied the capital balance of listed companies of about 2.884 billion yuan, accounting for 328.17% of the latest audited net assets. Accordingly, the Jiangsu Securities Regulatory Bureau decided to take corrective regulatory measures against ST Red Sun, Nanyinong Group, Red Sun Group, and Jiangsu Guoxing, and to record the relevant information in the integrity files of the securities and futures market; at the same time, Nanyinong Group and its related parties were required to return the occupied funds within six months.

In addition, * ST Zhongli, ST China Railway and other funds are also occupied more than 1 billion yuan.

The announcement shows that from 2018 to 2023, * ST Zhongli controlling shareholder Zhongli Holdings, the actual controller Wang Baixing non-operating occupation of * ST Zhongli funds. By the end of 2023, Zhongli Holdings and Wang Baixing non-operating occupied * ST Zhongli fund balance of 1.805 billion yuan.

Photo Source: company announcement

From 2019 to 2022, ST China Railway had capital exchanges with related parties controlled by its actual controller, Xuan Ruiguo. By the end of 2022, the company's controlling shareholders and other related parties still had a balance of funds occupied by non-operating funds (including the total principal and interest) of about 1.338 billion yuan. According to the announcement, as of April 29, 2024, the company's controlling shareholders and other related parties have returned only about 110 million yuan in cash.

Shareholder subrogation action initiated in investor service center

The occupation of funds by major shareholders infringes upon the interests of listed companies and the legitimate rights and interests of investors, and seriously erodes the basis of market integrity, which is a serious and persistent disease affecting the healthy development of the capital market.

As a full-time institution carrying out the duty of investor protection, after the implementation of the Securities Law in 2019, the CSI medium and small Investor Service Center (hereinafter referred to as "Investor Service Center") actively carried out shareholder subrogation litigation to safeguard the legitimate rights and interests of listed companies and medium and small investors.

The reporter learned that at present, the Investor Service Center has filed a shareholder subrogation lawsuit against the controlling shareholders, actual controllers, directors, executives and other responsible subjects on the 1.3 billion yuan occupied by the major shareholders of ST China Railway.

In addition, the investor service center insists on the two-wheel drive of inquiry and litigation, and urges the company to rectify and reform through communication and coordination before filing a subrogation lawsuit. The investor service center has sent a shareholder inquiry suggestion letter on the occupation of funds by ST Red Sun major shareholders, suggesting that listed companies should file a lawsuit to recover the funds from the occupants as soon as possible.

There is a precedent for subrogation litigation in the investor service center. In 2022, the investor service center filed a shareholder subrogation lawsuit against ST Modern. The Guangzhou Intermediate people's Court of first instance ruled that the controlling shareholder returned 240 million yuan of occupied funds and corresponding interest to the listed company, and the responsible directors, supervisors and senior executives were jointly and severally liable for compensation.

Photo Source: company announcement

In this case, the investor service center sent a letter in advance to urge the listed company to claim the creditor's rights in time, and filed the lawsuit in time before the controlling shareholder was filed for bankruptcy by other creditors, which effectively safeguarded the due interests of the listed company when the controlling shareholder misappropriated the company's funds but the controlling shareholder himself fell into the risk of bankruptcy.

The case has also become a strong embodiment of the normal coordination mechanism of financial justice and financial supervision, effectively guiding the standardized operation of market subjects through precedents, and effectively rectifying the chaos occupied by major shareholders of listed companies. The investor service center said that it will continue to pay attention to the occupation of funds by * ST Zhongli, * ST Communications, ST Sansheng, ST Haoyuan, ST Changkang, and * ST Shenzhen.

The "sniper war" has officially begun.

Capital market research experts pointed out that the order correction and concern letter of the nine companies demanding that the rectification and reform be completed within the time limit is a concrete manifestation of the regulatory bodies' implementation of the central financial work conference and the new "Nine National articles." it also means that the "sniper war" on the occupation of funds under the new delisting rules has officially begun.

On April 12, "some opinions of the State Council on strengthening Supervision and preventing risks to promote the High-quality Development of the Capital Market" proposed to strengthen the implementation of standardized delisting; the Securities Regulatory Commission issued the "opinions on the strict implementation of the delisting system". It is clear that large shareholders occupy a large amount of funds and do not rectify the situation, it will be considered in the compulsory delisting.

On April 30, the Shanghai and Shenzhen exchanges issued new delisting rules, adding to the delisting of funds, which clearly stipulates that the balance of non-operating funds occupied by the controlling shareholders and their associated persons of the company reaches more than 200 million yuan or accounts for more than 30% of the absolute value of the company's latest audited net assets, and is ordered by the CSRC to correct but fails to complete the rectification within the required time limit, the trading shall be suspended for 2 months in order. Delisting 2 months after the implementation of the delisting risk warning.

Shenzhen Stock Exchange listing rules (revised in 2024) Photo Source: official website of Shenzhen Stock Exchange

In fact, the Shanghai and Shenzhen exchanges have always maintained a "zero tolerance" for the occupation of funds.

In January 2023, the Shanghai and Shenzhen exchanges revised and issued the disciplinary standards, further increased the punishment for the occupation of funds, and made it clear that if the huge amount of funds occupied refuses to repay, thus seriously harming the interests of listed companies and investors, the controlling shareholders and actual controllers occupied by the organizations and instructions shall not accept the issuance and listing application documents submitted by the controlling shareholders, actual controllers and other issuers under their control for a certain period of time.

In 2023, the Shanghai and Shenzhen stock exchanges took a total of 45 disciplinary actions against the major shareholders who violated the regulations, severely punished the "first evil" who were mainly responsible for the violations, such as the controlling shareholders and the actual controllers, and severely punished the acts of breach of trust and harming the interests of listed companies.

Capital market research experts said that the occupation of funds by controlling shareholders seriously infringes upon the legitimate rights and interests of minority shareholders and the order of the capital market. Companies with such situations often have major defects in standardizing their operation, and internal controls are in vain. It is necessary to remove from the market, and early delisting of such companies can effectively avoid further damage to the rights and interests of investors.

The new delisting rules add the situation of delisting funds, which is conducive to effectively strengthen the regulatory deterrent to the embezzlement of major shareholders, urge major shareholders to repay the occupied funds, and help to maintain the financial independence of listed companies.