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
CENSURES:
- Fusen Pharmaceutical Company Limited (Stock Code: 1652);
- Mr Cao Chang Cheng, chairman and executive director;
- Mr Cao Zhi Ming, executive director and chief executive officer;
- Mr Chi Yong Sheng, executive director;
- Mr Hou Tai Sheng, executive director; and
- Ms Meng Qing Fen, executive director.
AND FURTHER DIRECTS:
each of the directors to attend 24 hours of training on regulatory and legal topics including Listing Rule compliance.
Between March 2019 and February 2020, the Company made twenty advances totalling approximately RMB258 million and two payments of RMB50 million to a company in which Mr Cao Chang Cheng, the Company’s chairman, had a 50 per cent interest. The advances were unsecured, not evidenced by any written agreement, and without any agreement on a fixed repayment term.
The size and connected nature of these transactions meant that the Company was required under the Rules to, amongst other things, make disclosures and seek independent shareholder approval. However, the Company failed to comply with these requirements. Furthermore, as the Company had been listed in July 2018, it was required to consult its compliance adviser when contemplating the transactions. This did not happen either.
Chairman Cao was, at the time of the transactions, the legal representative, executive director and general manager of the company receiving the monies, but he denied knowing about them.
The directors said they received monthly financial statements and were fully aware of the Company’s financial position, but they did not raise questions at the time about any changes in the Company’s receivables or cash balance, as they were more concerned with revenue and profits than liquidity.
After the Company discovered the transactions and the Rule breaches, an internal control review was conducted, which found several deficiencies relating to monitoring, detecting, approving and disclosing connected transactions and loans.
Key messages:
Individual directors must manage any potential conflicts of interest appropriately and with full transparency.
Directors should carefully monitor the company’s financial position, and proactively make enquiries if there are any unusual or unexpected changes.
All members of the board must ensure that there is an effective control environment in operation, to allow checks-and-balances to take place, and to assist in the identification and appropriate handling of transactions that are subject to Listing Rule obligations.
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