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Our Ref: No.8 [2003] CSRC
June 4, 2003
Parties involved:
Guangzhou Nanhuaxi Industrial Co., Ltd, domiciled at 1F, Qixing Zhongbei No.2, Tongfu W. Road, Guangzhou city, Guangdong Province. Its legal representative is He Jingtang.
Mr. He Jingtang, born in October 1951, Han, the current board chairman of Guangzhou Nanhuaxi Industrial Co., Ltd.
Mr. Sun Fanbo, born in October 1948, Han, the current vice board chairman of Guangzhou Nanhuaxi Industrial Co., Ltd
Mr. Xiao Honghui, born in March 1967, Han, the current director & general manager of Guangzhou Nanhuaxi Industrial Co., Ltd.
Ms. Han Huiqi, born in September 1957, Han, the current director of Guangzhou Nanhuaxi Industrial Co., Ltd.
Ms. Zhang Di, born in May 1963, Han, the current director & secretary to the board of directors of Guangzhou Nanhuaxi Industrial Co., Ltd
Ms. Luo Xiaoling, born in October 1957, Han, the current director & general accountant of Guangzhou Nanhuaxi Industrial Co., Ltd.
Mr. Luo Changming (arrested), the former director of Guangzhou Nanhuaxi Industrial Co., Ltd.
Mr. Ye Zhongcheng, born in August 1941, Han, the current director of Guangzhou Nanhuaxi Industrial Co., Ltd
Mr. Huang Qinglong, born in August 1952, Han, the current director of Guangzhou Nanhuaxi Industrial Co., Ltd
Mr. Zhou Hansheng, born in April 1956, Han, the current director of Guangzhou Nanhuaxi Industrial Co., Ltd
Mr. Cen Jian (unknown), the current director of Guangzhou Nanhuaxi Industrial Co., Ltd
Mr. Huang Shaokuan, born in July 1961, Han, the current director of Guangzhou Nanhuaxi Industrial Co., Ltd
Mr. Guan Boshan, born in October 1939, Han, the current director of Guangzhou Nanhuaxi Industrial Co., Ltd
On April 6, 2001, the CSRC, after preliminary investigation, hereby decided to conduct investigation regarding the case of Guangzhou Nanhuaxi Industrial Co., Ltd (hereinafter referred to as “Nanhuaxi Company) and relevant personnel violating the securities laws and regulations. In response to the application of the party, the CSRC held a hearing on July 30, 2002 to hear the statements and arguments of the party and its attorney. The relevant investigation has been completed.
After investigation, it is found that the party Nanhuaxi Company has following illegal actions:
1. Failure to disclose the fact concerning capital embezzled by the Group Company.
It is found that Nanhuaxi Company was embezzled CNY 320.87 million, CNY312 million respectively in years 1999 and 2000 by Guangzhou Nanhuaxi Enterprise Group Co., Ltd (hereinafter referred to Group Company). As of the end of year 2000, the Group Company and its subsidiaries has embezzled a total of CNY 630.87 million from Nanhuaxi Company and its subsidiaries. Of these embezzled capitals, CNY 123.63 million is from Nanhuaxi Company Head Office, CNY 495.79 million from Nanhua Industrial and Trading Co., Ltd, CNY 630,500 from Nanhuaxi Central Air Conditioning Co., Ltd, CNY 5.6 million from Huasheng Lightning Arrester Co., Ltd, and CNY 7.22 million from Guangzhou Special Transformer Co., Ltd. Nanhuaxi Company failed to disclose the above affairs in the interim report for 1999, annual report for 1999 and interim report for 2000 in accordance with the provisions under the Enterprise Accounting Principles—Disclosure of Connected Relationship and Transaction and relevant information disclosure principles issued by the CSRC. These affairs were disclosed on March 3, 2001.
The direct persons-in-charge responsible for the above illegal actions include directors of Nanhuaxi Company (also directors of Group Company) and directors who signed the decisions of the board of directors regarding capital of Nanhuaxi Company embezzled by Group Company and at the decisions of the board of directors regarding the passing of interim report for 1999, annual report for 1999 and interim report for 2000, such as He Jingtang, Kong Fanbo, Luo Changming and Ye Zongcheng. Other direct persons-in-charge include directors who signed the interim report for 1999, annual report for 1999 and interim report for 2000, such as Zhang Di, Han Huiqi, Huang Qinglong, Luo Xiaoling and Zhou Hansheng, Xiao Honghui who signed the annual report for 1999 and interim report (2000), Cen Jian who signed the annual report for 1999 and Huang Shaokuan who signed the interim report for 1999.
2. Failure to disclose the fact of providing bank loan guarantee
It is found that Nanhuaxi Company and its subsidiaries had provided bank loan guarantees of CNY 500,000, CNY 100 million, CNY 251.70 million and CNY 116.90 million in 1997, 1998, 1999 and 2000 respectively. Nanhuaxi Company failed to disclose the above affairs in the annual report for 1997, interim report for 1998, annual report for 1998, interim report for 1999, annual report for 1999, interim report for 2000 and temporary reports in accordance with the provisions under the Enterprise Accounting Principles—Disclosure of Connected Relationship and Transaction and relevant information disclosure principles issued by the CSRC. Nanhuaxi Company did not disclose these affairs until January 19 2001.
The direct person-in-charge responsible for the above illegal actions is He Jingtang, the board chairman of Nanhuaxi Company. Other direct persons-in-charge include directors who signed in the annual report for 1998, interim report for 1999, annual report for 1999 and interim report for 2000, such as Zhang Di, Kong Fanbo, Luo Changming, Han Huiqi, Huang Qinglong and Luo Xiaoling, directors who signed in the interim report for 1999, annual report for 1999 and interim report for 2000, such as Ye Zongcheng and Zhou Hansheng, Xiao Honghui who signed in the annual report for 1999 and interim report for 2000, Huang Shaokuan who signed in the annual report for 1998 and interim report for 1999, Guan Boshan who signed in the annual report for 1998, and Cen Jian who signed in the annual report for 1999.
3. Failure to disclose equity pledge
It was found out that the group company pledged 57,565,766 shares of legal person shares of Nanhuaxi Company it held to the banks, with 42,565,766 shares pledged to Industrial and Commercial Bank of China Guangzhou Tongfu Central Road Branch in October 1999, 15 million shares pledged to Bank of China Guangzhou Haizhu Branch in 2000.
However, Nanhuaxi Company failed to disclose the above events in the interim report for 2000 according to the relevant information disclosure standards prescribed by the CSRC. It was till March 9, 2001 that the company began to make public announcement for this.
The person in charge who is directly responsible for the above illegal actions is the board chairman of Nanhuaxi Company He Jingtang who signed the pledge contract. Other persons with direct responsibilities include the directors who signed the interim report for 2000: Zhang Di, Kong Fanbo, Luo Changming, Han Huiqi, Ye Zongcheng, Huang Qinglong, Luo Xiaoling, Zhou Hansheng and Xiao Honghui.
The above facts are proved by the annual report for 1998, the interim report and annual report for 1999 and the interim report for 2000 of Nanhuaxi Company which have been publicized but have major omission, the agreement for capital impropriation, the relevant vouchers, the resolutions of board of director of the group company, the guarantee contract, the pledge contract, the share pledge registration certificate, the resolutions of board of directors of Nanhuaxi Company, the statement of Nanhuaxi Company on capital impropriation, providing guarantee for the group company and the equity pledged by the group company, the conversation record of the relevant directors. The evidences are authentic and sufficient for the judgment.
The CSRC decides that the above actions of Nanhuaxi Company and the relevant directors have breached Item 2 of Article 74 of Provisional Regulations on Administration of Share Issuance and Trading and Item 1 of Article 177 of Securities Law and constitute the illegal action of major omission. The persons in charge who are directly responsible for the above illegal actions include: the board chairman of Nanhuaxi Company He Jingtang, the vice board chairman Kong Fanbo, the directors Xiao Honghui, Han Huiqi, Zhang Di and Luo Xiaoling. Other persons with direct responsibilities include the directors Luo Changming, Ye Zongcheng, Huang Qinglong, Zhou Hansheng, Cen Jian, Huang Shaokuan and Guan Boshan.
According to Item 2 of Article 74 of Provisional Regulations on Administration of Share Issuance and Trading and Article 177 of the Securities Law, the CSRC decides to:
(1) Impose a fine of CNY 500 thousand on Nanhuaxi Company;
(2) Impose a warning and a fine of CNY 100 thousand on the board chairman of Nanhuaxi Company He Jingtang, impose a warning and a fine of CNY 50 thousand respectively on the vice board chairman Kong Fanbo, the directors Xiao Honghui, Han Huiqi, Zhang Di and Luo Xiaoling, and impose a warning and a fine of CNY 30 thousand respectively on the directors Zhou Hansheng, Ye Zongcheng, Huang Shaokuan, Huang Qinglong, Guan Boshan, Luo Changming and Cen Jian.
The aforesaid parties shall pay the fine to the CSRC (Opening Bank: CITIC Industrial Bank Head Office, Account No.: 7111010189800000162. The fine will be submitted to the treasure house directly by the bank) within 15 days as of the date of the issuance of this Letter of Disciplinary Penalty, and file the copy of payment voucher with the Department of Legal Affairs of the CSRC. If the relevant parties disagree with the penalties, they can raise administrative reconsideration to the CSRC within 60 days as of the date of the receipt of this Letter of Disciplinary Penalty, and can also directly raise litigations to the people’s court with jurisdictions within 3 months as of the date of the receipt of this Letter of Disciplinary Penalty. Yet the above decisions shall continue to be executed during the period of reconsideration and litigation.
The China Securities Regulatory Commission
(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)
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