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ST China Railway (Protection of Rights) (000976Crashbandicootnsanetrilogyswitch.SZ) due to unresolved issues such as the occupation of funds by the controlling shareholders, the CSRC has twice filed a case for investigation. Today, regulationCrashbandicootnsanetrilogyswitchThe formal punishment has also been issued.

On the evening of May 10th, ST Huatie received the "Administrative penalty decision" and "Market ban decision" issued by Guangdong Securities Supervision Bureau.

The Guangdong Securities Regulatory Bureau decided to give a warning to ST Huatie and impose a fine of 8 million yuan, a warning to Xuan Ruiguo, the actual controller, a fine of 8 million yuan, and a lifetime ban on the market.

On the same day, the regulator also issued an ultimatum to the company to complete the collection of the occupied funds within six months. Subsequently, the Shenzhen Stock Exchange also sent a letter of concern to the company, requiring listed companies and controlling shareholders, actual controllers to effectively rectify and reform.

ST Huatie said in the announcement on the same day that it will seriously learn lessons, strengthen the standardization of internal governance, improve the quality of information disclosure and strictly abide by relevant laws and regulations, truly, accurately, completely, timely and fairly perform information disclosure obligations, and safeguard the interests of the company and the majority of shareholders.

At noon on May 11th, the 21st Century Economic report came to Building 27, Xinghua Dongli, Dongcheng District, Beijing, and visited the ST Huatie office in the whirlpool.

Under the five-story office building, there is a small parking lot in which more than a dozen cars are parked in the scorching sun.

Entering the company, the 21st Century Economic report reporter took the elevator on the left to the fifth floor and had a simple communication with him outside Xuan Ruiguo's office. He told the reporter that there was significant and sensitive information related to the stock price. Nothing can be disclosed now.

When asked by a reporter, "the current pressure is not great", he said with a smile, "the pressure can not be great."

The occupation of huge funds remains to be solved.

ST Huatie is a rail transit parts manufacturer. At present, the controlling shareholder of the company is the Lhasa Economic and technological Development Zone Taitong Investment Partnership (Limited Partnership) (hereinafter referred to as "Lhasa Taitong"), and the actual control is Xuan Ruiguo.

Set the pointer back to April 28, 2023, according to the 2022 annual report issued by ST China Railway, the company's controlling shareholders and other related parties occupied 13% of the company's non-operating funds.Crashbandicootnsanetrilogyswitch.5.4 billion yuan.

From the point of view of the flow of 1.354 billion funds, it is mainly for the purchase of assets such as the German BVV Group and Dongying Heli Wheel Factory, with a cumulative investment of more than 2 billion yuan.

BVV, located in Bochum, Germany, is a supplier of high-speed rail wheels and axles. According to Xuan Ruiguo, BVV faced huge losses at that time and there was a lot of uncertainty in the acquisition. After twists and turns, it completed the deal with its Fushan Group.

He joined ST China Railway in January 2020, and the latter officially started the work of injecting BVV into listed companies in 2021, proposing to acquire a stake in BVV76% with 1.748 billion yuan in cash. However, due to the influence of the external objective environment, the transfer of overseas assets could not be completed, and the acquisition was forced to be terminated.

After failing to include BVV in the listed company's plan, Xuan Ruiguo changed his strategy and bought Shandong Dongying Heli Wheel Factory.

In May 2020, Shandong Dongying Heli Wheel Factory, which has a full set of imported wheel production equipment, held a bankruptcy auction. Xuan Ruiguo and partners jointly contributed 603 million yuan to it through Shandong Bochum Rail Transit equipment Technology Co., Ltd. (hereinafter referred to as "Bochum Rail Jiao").

"for the occupation of non-operating funds, there is no subjective malice. Based on the strategic development of the company, the unsuccessful use of company funds to carry out major asset restructuring leads to the unresolved occupation of non-operating funds." Xuan Ruiguo and his lawyers said at a hearing held by the Guangdong Securities Regulatory Bureau on March 20.

However, in the view of the interviewees, no matter how the related parties occupy the non-operating funds of listed companies, it is hard to hide the nature of violations.

"the listed company itself is independent and is not the cash machine of the controlling shareholder and the actual controller. As a listed company, it should abide by the rules and keep its financial and business independence. " Xu Feng, director and chief partner of Shanghai Jiucheng Law firm, told reporters.

Due to the problem of capital occupation, the internal control audit report of ST Huatie in 2022 was issued a negative opinion, and the company's shares were labeled "ST" since May 5, 2023.

In June of the same year, the company revealed that it had set up a special team to recover funds. In response to the inquiry letter of the Shenzhen Stock Exchange that month, the company said that the realised value of the assets held by the controlling shareholder and actual controller, Xuan Ruiguo, was sufficient to repay the funds occupied and its interest, and had the ability to guarantee performance.

The reporter noted that in the past year, ST China Railway controlling shareholders and other related parties have returned some of the funds to listed companies, but in front of the huge base to be returned, it is a drop in the bucket.

As of April 29th this year, the controlling shareholders of ST China Railway and other related parties had returned a total of about 110 million yuan (including 105 million yuan in principal and 4.8957 million yuan in interest), and the outstanding balance was 1.281 billion yuan (including 1.159 billion yuan in principal and 122 million yuan in interest).

On April 30th, ST China Railway announced that its shares had been suspended from trading since the market opened on May 6, 2024 because it was unable to disclose its 2023 annual report within the legal time limit.

Shares in ST China Railway have fallen 77.1 per cent since the incident of capital appropriation by controlling shareholders was revealed, according to Wind. As of the suspension, the company's share price is less than 1 yuan per share.

Regulatory ultimatum

"the occupation of funds by non-operating related parties such as controlling shareholders is a tunneling behavior to the listed company and damage to the interests of the listed company and all shareholders." Xu Feng told the 21st century economic reporter.

Regulators also keep a close eye on ST China Railway. On July 12, 2023, the company and the actual controller, Xuan Ruiguo, were put on file for investigation by the Securities Regulatory Commission on suspicion of violating the law and regulations.

On February 8 this year, ST China Railway announced that the company and the relevant parties had received the "advance notice of Administrative punishment and Market ban" issued by the Guangdong Securities Regulatory Bureau. It was found out that the company and the actual controller, Xuan Ruiguo, were suspected of disclosing the following illegal and illegal facts:

First, there are false records in the annual reports for 2020 and 2021; second, the company fails to disclose related party transactions in accordance with the regulations, and there are major omissions in the annual reports from 2019 to 2022. In addition, by the end of 2022, the company's controlling shareholders and their related parties still have non-operating funds occupying about 1.338 billion yuan.

On May 8, ST China Railway announced that it had received a "case filing notice" issued by the CSRC because the company was suspected of failing to disclose the 2023 annual report and the first quarterly report of 2024 on time. This is the second time that the company has been investigated by the CSRC.

On the evening of May 10th, nine listed companies, including ST, China Railway, announced that they had received regulatory orders to make corrective measures, all due to the non-operating occupation of large amounts of funds by controlling shareholders.

The Securities Regulatory Bureau requires the above-mentioned companies to complete the collection of occupied funds within 6 months. Subsequently, the Shanghai and Shenzhen exchanges also issued letters of concern one after another, requiring listed companies, controlling shareholders and actual controllers to effectively rectify and reform.

According to the regulatory requirements, if the company fails to collect the occupied funds within 6 months in accordance with the requirements of order and correction, the stock trading shall be suspended, and if the rectification has not been completed within 2 months after the suspension, the delisting risk warning shall be implemented. if the rectification has not been completed within 2 months, the exchange will decide to terminate the listing of the company's shares.

In other words, there is only a maximum period of 10 months for controlling shareholders such as ST to return the occupied funds, and if they fail to repay within the time limit, they will be forced to delist.

In Xu Feng's view, the recent regulatory policy may have a certain effect on cleaning up the non-operating funds occupied by related parties.

"if the occupant itself has the ability to repay, then it may be cleaned up in time in accordance with the requirements of supervision, and for individual companies that no longer have the ability to repay, it does not rule out that the relevant personnel may be suspected of crimes such as breach of trust and harming the interests of listed companies." Xu Feng pointed out.

On the same day, ST China Railway also received the "Administrative penalty decision" and "Market ban decision" issued by the Guangdong Securities Regulatory Bureau. The Guangdong Securities Regulatory Bureau decided to give a warning to ST Huatie and impose a fine of 8 million yuan, a warning to Xuan Ruiguo, a fine of 8 million yuan, and a lifetime ban on the market.

ST Huatie stated in its announcement on May 10th that the company will conscientiously draw lessons from experiences and lessons, strengthen the standardization of internal governance, improve the quality of information disclosure and strictly abide by relevant laws and regulations, truly, accurately, completely, timely and fairly perform information disclosure obligations, and safeguard the interests of the company and the majority of shareholders.

under mountain-like pressure

The time left for ST Huatie is running out, and the company is under constant internal and external pressure.

On the evening of April 19th, ST China Railway announced that it had received a "supervision letter on promoting the rectification of violations by Guangdong Huatie Tongda High Speed Rail equipment Co., Ltd., and doing a good job in the 2023 annual report" (hereinafter referred to as the "supervision letter").

According to the "Supervision and Promotion letter", through letters, interviews, communications, etc., the independent board urges the controlling shareholder and other related parties to return the money as soon as possible, and requires the company to actively strengthen the management and rectification of internal control. and true, accurate, complete, timely information disclosure and so on.

In addition, by reviewing the disclosure materials for the preparation of the annual report, the independent board of directors found that there were other abnormal capital expenditure matters such as large abnormal advance payments of ST China Railway in 2023 that had not been submitted to the board of directors for consideration.

Du Dong said that if the occupied funds are not returned by August 30 this year, and the company fails to complete the rectification of matters such as non-standard capital control, du Dong will not be able to agree to the disclosure of the 2023 financial report and internal control audit report. then the company will not be able to disclose its annual report before the end of August this year and will be forced to delist.

Judging from the current financial situation of the company's controlling shareholders, there is a mountain of mountains ahead of repayment.

According to the ST China Railway announcement, as of May 9, the total number of shares held by ST China Railway controlling shareholders and their concerted actors was 401 million shares, accounting for 25.12% of the total share capital.

Among them, the controlling shareholders and their concerted actors pledged a total of about 400 million shares of the company, accounting for more than 80% of their shares. A total of 171 million shares of controlling shareholders have been judicially frozen, accounting for 10.69 per cent of the total share capital of the company.

In the state of high proportion pledge, the controlling shareholders and actors are in crisis of liquidating positions. If the company's share price falls sharply and major shareholders are unable to add guarantees in time, financial institutions may dispose of pledged equity, which may lead to a change in the actual controller.

In addition, ST China Railway and its controlling shareholders are suffering claims from investors.

As of the end of 2023, ST China Railway had 37158 shareholder households, according to Wind.

Due to the occupation of non-operating funds such as the controlling shareholder and the actual controller of the company, the service center has filed a civil lawsuit against the controlling shareholder, the actual controller and some senior executives of the company on the grounds of the liability dispute of harming the company's interests.

The 21st Century Business Herald also learned that a number of law firms have also sued ST Huatie to the court on behalf of some investors, asking listed companies and other entities to compensate for the losses caused by false statements.

"before that,CrashbandicootnsanetrilogyswitchOur tentative scope is to buy China Railway shares between April 25, 2018 and April 29, 2023, and investors who sell or hold them after April 29, 2023 can file claims and are currently awaiting court hearing arrangements. " Xu Feng said.

But if you are lucky enough, ST China Railway may not be able to wait for the white knight.

Public information shows that on February 5 this year, ST China Railway and Hangshi Fund reached a strategic cooperation agreement. It is stipulated in the agreement that the latter actively coordinates the investment resources of relevant industries under the premise of reasonable valuation and controllable risk, together with ST China Railway to assist it in gradually solving the problem of controlling shareholders occupying funds of listed companies in accordance with the law through various means and means of cooperation.

However, so far, there has been no further news about the cooperation between the two sides.

(article Source: 21st Century Economics report)