Guangyuyuan was fined 8 million for false records in financial reports for many years, and Zhang Bin, the chairman at the time, "completely" resigned

Zhongxin Jingwei, April 11 Guangyuyuan issued an announcement on the 10th on the company and related parties receiving the "Administrative Penalty Decision" and "Market Ban Decision" from the Shanxi Securities Regulatory Bureau.

On December 28, 2023, Guangyuyuan received the "Notice of Case Filing" issued by the China Securities Regulatory Commission, due to the company's suspected illegal information disclosure, in accordance with the "Securities Law of the People's Republic of China", "Administrative Punishment Law of the People's Republic of China" and other laws and regulations, on December 22, 2023, the China Securities Regulatory Commission decided to file a case against the company.

On March 25, 2024, the company received the "Prior Notice of Administrative Punishment and Market Prohibition" issued by the Shanxi Supervision Bureau of the China Securities Regulatory Commission.

On April 10, 2024, the Company and relevant parties received the Administrative Penalty Decision ([2024] No. 1, No. 2, No. 3, No. 4, No. 5, No. 6, No. 7, and No. 8) and the Market Prohibition Decision issued by the Shanxi Securities Regulatory Bureau.

The Shanxi Securities Regulatory Bureau stated that after investigation, Guangyuyuan shares and related parties have the following illegal facts:

Guangyuyuan's annual report from 2016 to 2021 disclosed that the "buyout sales" model was untrue, and in the case that the subsidiary Shanxi Guangyuyuan and some downstream commercial companies had an agreement that "the product is unsalable and close to the expiration date, it can be returned unconditionally", and implemented pressure on some downstream commercial companies, abused the accounting policy of "recognizing revenue when leaving the warehouse", recognized sales revenue in advance, and at the same time, the treatment of sales expenses was incorrect, and some sales expenses had inaccurate attribution periods or accounting treatment did not comply with the provisions of the accounting standards for business enterprises.

The above situation has led to false records in the annual report from 2016 to 2022 and the semi-annual report of 2023. The details are as follows:

In 2016, the inflated operating income was 70.7481 million yuan, accounting for 7.55% of the disclosed operating income in the current period, the inflated sales expenses were 18.5812 million yuan, accounting for 4.31% of the disclosed sales expenses in the current period, and the inflated profit was 43.8283 million yuan, accounting for 23.39% of the total disclosed profit in the current period.

In 2017, the inflated operating income was 132 million yuan, accounting for 11.26% of the disclosed operating income in the current period, and the inflated sales expenses were 89.8461 million yuan, accounting for 17.42% of the disclosed sales expenses in the current period: taking into account the impact of relevant impairments, the inflated profit was 201 million yuan, accounting for 66.18% of the total disclosed profit in the current period.

In 2018, the inflated operating income was 324 million yuan, accounting for 20.04% of the disclosed operating income in the current period, the inflated sales expenses were 64.2651 million yuan, accounting for 10.22% of the disclosed sales expenses in the current period, and the inflated profit was 334 million yuan, accounting for 73.95% of the total disclosed profit in the current period.

In 2019, the inflated operating income was 14.195 million yuan, accounting for 1.17% of the disclosed operating income in the current period, the inflated sales expenses were 66.8968 million yuan, accounting for 12.36% of the disclosed sales expenses in the current period, and the inflated profit was 73.3803 million yuan, accounting for 46.45% of the total disclosed profit in the current period.

In 2020, the inflated operating income was 21.5924 million yuan, accounting for 1.95% of the disclosed operating income in the current period, the inflated sales expenses were 24.2086 million yuan, accounting for 4.19% of the disclosed sales expenses in the current period, and the inflated profit was 21.0623 million yuan, accounting for 120.29% of the total disclosed profit in the current period.

In 2021, the inflated operating income was RMB239 million, accounting for 27.96% of the disclosed operating income for the current period, the inflated sales expenses were RMB104 million, accounting for 13.35% of the disclosed sales expenses for the current period, and the inflated profit was RMB270 million, accounting for 76.66% of the absolute value of the total disclosed profit for the current period.

In 2022, the inflated operating income was 136 million yuan, accounting for 13.68% of the disclosed operating income in the current period, the inflated sales expenses were 60.8339 million yuan, accounting for 7.13% of the disclosed sales expenses in the current period, and the inflated profit was 155 million yuan, accounting for 36.87% of the absolute value of the total disclosed profit in the current period.

In the first half of 2023, the inflated operating income was 29.7093 million yuan, accounting for 4.48% of the disclosed operating income in the current period, the inflated sales expenses were 14.3754 million yuan, accounting for 3.93% of the disclosed sales expenses in the current period, and the inflated profit was 44.0847 million yuan, accounting for 269.86% of the total disclosed profit in the current period.

The Shanxi Securities Regulatory Bureau stated that the above-mentioned illegal facts were proved by relevant announcements, meeting resolutions, financial information, business contracts, explanations, industrial and commercial materials, inquiry records and other evidence, which were sufficient to determine.

The behavior of Guangyuyuan shares violated the relevant provisions of the Securities Law of the People's Republic of China revised in 2005 and constituted false records in information disclosure.

Zhang Bin, as the chairman, general manager and director of Guangyuyuan at the time, signed a written confirmation opinion on the annual reports disclosed by Guangyuyuan from 2016 to 2021 and guaranteed that the content of the above documents was true, accurate and complete. Zhang Bin has the decision-making power over the operation and management of Guangyuyuan, directly manages the sales business, and in order to achieve the performance commitment, the organization and decision-making implementation have reached an agreement with some downstream commercial companies that "the product is unsalable and close to the expiration date, and can be returned unconditionally", and the company uses the company's "revenue is recognized when it leaves the warehouse" The accounting policy recognized revenue in advance, and knew that Shanxi Guangyuyuan did not record sales expenses in accordance with the regulations or recorded a large number of sales expenses across periods, and failed to be diligent and conscientious, and was the person in charge directly responsible for the false records in the annual reports of Guangyuyuan Co., Ltd. from 2016 to 2021, in violation of the provisions of Article 68, Paragraph 3 of the Securities Law of 2005 and Paragraph 3 of Article 82 of the Securities Law.

Fu Shuhong, as the director, chief financial officer and deputy general manager of Guangyuyuan at the time, signed a written confirmation opinion on the annual reports disclosed by Guangyuyuan from 2016 to 2021 and guaranteed that the content of the above documents was true, accurate and complete. Fu Shuhong, as the chief financial officer, was negligent in the management of Guangyuyuan's financial work, failed to pay due attention to the matching degree between the accounting policy of "revenue recognition when out of the warehouse" and the business substance in the context of the rapid growth of Shanxi Guangyuyuan's business scale, failed to fulfill her due management obligations on issues such as cross-period recognition of sales expenses and financial management chaos, and failed to be diligent and conscientious, and was the person in charge directly responsible for the false records in Guangyuyuan's annual reports from 2016 to 2021, in violation of Article 68, Paragraph 3 of the Securities Law of 2005 and the Securities Law Article 82, paragraph 3.

Zhang Zhengzhi, as the supervisor of Guangyuyuan at the time, successively served as the medical director and general manager of Shanxi Guangyuyuan Classic Chinese Medicine Division, and signed a written confirmation opinion on the annual reports disclosed by Guangyuyuan from 2016 to 2021 and guaranteed that the content of the above documents was true, accurate and complete. Zhang Zhengzhi participated in the decision-making of the agreement of "unsalable products and near-expiration dates, and can be returned unconditionally", and was the main executor of the pressing business, and did not pay sufficient attention to the mismatch between Shanxi Guangyuyuan's accounting policy of "recognizing revenue when leaving the warehouse" and the business substance, and the problem of large cross-period sales expenses, and was the other directly responsible person for the false records in Guangyuyuan's annual reports from 2016 to 2021, in violation of the provisions of paragraph 3 of Article 68 of the Securities Law of 2005 and paragraph 3 of Article 82 of the Securities Law.

Wang Junbo, as the chief financial officer of Guangyuyuan, signed a written confirmation opinion on the 2022 annual report and 2023 semi-annual report disclosed by Guangyuyuan, and guaranteed that the content of the above documents was true, accurate and complete. Wang Junbo, as the main person in charge of Guangyuyuan's financial management and accounting error correction work, failed to pay full attention to Shanxi Guangyuyuan's historical business behavior and financial processing abnormalities, failed to complete the accounting error correction work in a timely manner, and failed to be diligent and conscientious, and was the person in charge directly responsible for the false records in Guangyuyuan's 2022 annual report and 2023 semi-annual report, violating the provisions of Article 68, Paragraph 3 of the Securities Law of 2005 and Article 82, Paragraph 3 of the Securities Law.

Yang Hongfei, as the director, general manager and deputy general manager of Guangyuyuan at the time, signed a written confirmation opinion on the annual reports disclosed by Guangyuyuan from 2016 to 2019 and guaranteed that the content of the above documents was true, accurate and complete. Although Yang Hongfei did not manage the sales business, he did not pay due attention to the problems of Guangyuyuan's abuse of accounting policies and financial management chaos, and failed to be diligent and conscientious, and was the person in charge directly responsible for the false records in Guangyuyuan's annual reports from 2016 to 2019, violating the provisions of Article 68, Paragraph 3 of the Securities Law of 2005 and Article 82, Paragraph 3 of the Securities Law.

Li Zhong, as the deputy general manager in charge of the Classic Chinese Medicine Division at the time, signed a written confirmation opinion on the annual reports disclosed by Guangyuyuan from 2019 to 2021 and guaranteed that the content of the above documents was true, accurate and complete. Li Zhong was aware of the agreement and pressure on the "unsalable and near-expiration date of the product" and the situation of pressing the goods, and did not maintain due attention to the mismatch between Shanxi Guangyuyuan's accounting policy of "recognizing revenue when leaving the warehouse" and the essence of the business, and failed to be diligent and conscientious, and was the other person directly responsible for the false records in Guangyuyuan's annual reports from 2019 to 2021, in violation of the provisions of paragraph 3 of Article 68 of the Securities Law of 2005 and paragraph 3 of Article 82 of the Securities Law.

As an independent director of Guangyuyuan and the convener of the audit committee of the board of directors, Zhao Yuanyuan signed a written confirmation opinion on the annual reports from 2019 to 2021 disclosed by Guangyuyuan and guaranteed that the content of the above documents was true, accurate and complete. As an independent director with an accounting background, Zhao Xuanyuan failed to pay careful attention to the relevant content of Guangyuyuan's annual report and take sufficient measures to verify it, failed to be diligent and conscientious, and was other directly responsible for the false records in Guangyuyuan's annual reports from 2019 to 2021, violating the provisions of Article 68, Paragraph 3 of the Securities Law of 2005 and Article 82, Paragraph 3 of the Securities Law.

Based on the facts, nature, circumstances and degree of social harm of the parties' illegal acts, and in accordance with the provisions of Article 197, Paragraph 2 of the Securities Law, the Shanxi Securities Regulatory Bureau decides:

Guangyuyuan was given a warning and fined 8 million yuan.

Zhang Bin was given a warning and fined 5 million yuan.

Fu Shuhong was given a warning and fined 2.5 million yuan.

Zhang Zhengzhi was given a warning and fined 2.5 million yuan.

Wang Junbo was given a warning and fined 1 million yuan.

Yang Hongfei was given a warning and fined 800,000 yuan.

Li Zhong was given a warning and fined 800,000 yuan.

Zhao voter was given a warning and fined 500,000 yuan.

In addition, Zhang Bin's violation of the law was relatively serious, and in accordance with the 2005 Securities Law and other provisions, the Shanxi Securities Regulatory Bureau decided to impose a 10-year ban on Zhang Bin from entering the securities market. From the date of the announcement of the decision, during the prohibition period, in addition to continuing to serve as a director, supervisor or senior management of the original securities issuer, they are also prohibited from engaging in securities business, securities service business or serving as a director, supervisor or senior manager of another securities issuer in any other institution.

In terms of impact, Guangyuyuan said that according to the facts stated in the "Decision", the company judged that the illegal acts involving information disclosure did not touch the mandatory delisting of major violations stipulated in the "Shanghai Stock Exchange Stock Listing Rules" (revised in August 2023).

It is worth mentioning that on the evening of April 9, Guangyuyuan announced that the company's board of directors recently received a written resignation report from director Zhang Bin and director and president Miao Hui. Miao Hui applied for resignation as president, director and member of the remuneration and assessment committee of the company due to personal reasons, and after his resignation, Miao Hui no longer held any position in the company.

According to public information, Guangyuyuan is mainly engaged in the production and sales of traditional Chinese medicine products, and according to different product positioning and sales channels, the company's pharmaceutical industry mainly includes three major sectors: traditional Chinese medicine, high-quality Chinese medicine and health wine. The company's core products include Gu Lingji, Dingkun Dan and Angong Niuhuang Pill. The actual controller of the company is the State-owned Assets Supervision and Administration Commission of Shanxi Province.

In terms of performance, Guangyuyuan expects to achieve a net profit attributable to shareholders of listed companies of 100 million yuan to 120 million yuan in 2023, an increase of 499 million yuan to 519 million yuan compared with the same period last year, and an increase of 349 million yuan to 369 million yuan compared with the same period last year (retrospectively adjusted financial data), so as to turn losses into profits.

In the secondary market, as of the close of trading on April 10, Guangyuyuan reported 24.6 yuan per share, and the company's total market value was 12 billion yuan. (Sino-Singapore Jingwei APP)