香港联合交易所有限公司
(香港交易及结算所有限公司全资附属公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)
The Stock Exchange of Hong Kong Limited
CRITICISES:
1. Sunshine 100 China Holdings Ltd (Stock Code: 2608);
CENSURES:
2. Mr Yi Xiaodi, executive director and chairman;
3. Mr Fan Xiaochong, executive director and vice chairman;
CRITICISES:
4. Ms Fan Xiaohua, non-executive director;
5. Mr Wang Gongquan, non-executive director;
6. Mr Gu Yunchang, independent non-executive director;
7. Mr Ng Fook Ai, Victor, independent non-executive director;
8. Mr Li Chunping, independent non-executive director; and
9. Mr Wang Bo, former independent non-executive director,
AND FURTHER DIRECTS:
each of the above directors to attend training.
Between 2020 and 2022, the Company granted loans in the total sum of RMB1.11 billion. The borrowers were in financial difficulty, and were themselves creditors of debts of other ultimate borrowers. These debts were secured by a building in Beijing. The Company envisioned that any default would lead to a fire sale opportunity in which the Company could purchase the Beijing building at a substantial discount as a distressed asset in judicial auction.
Despite the significant risks arising from the loans, the directors did not procure sufficient due diligence prior to granting the loans, and they did not properly devise a strategy for the Company to recover the loans if the fire sale opportunity failed.
Mr Yi Xiaodi and Mr Fan Xiaochong were the executive directors responsible for procuring due diligence and implementation of these transactions.
The Company had various internal control deficiencies at the time, which contributed to the Company’s failure to (1) timely publish its annual and interim results and reports; and (2) comply with requirements applicable to notifiable and connected transactions, some of which related to the loans. For details of the Company’s breaches and the directors’ breaches concerning these deficiencies, please refer to the Statement of Disciplinary Action (see link below).
The Company and the directors have contributed to an expedited resolution of the matter by agreeing to settle this disciplinary action.
Key messages:
Directors must conduct sufficient due diligence and thorough risk assessment prior to committing the issuer’s funds in any transactions, particularly where they are high-risk.
An adequate and effective internal control framework is essential to ensure an issuer’s ability to comply with its reporting, disclosure and other obligations under the Listing Rules.
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