On April 29, Yongyue Technology Co., Ltd. (hereinafter referred to as "Yongyue Technology" or "the Company") issued the "Announcement on Receiving the Prior Notice of Administrative Punishment and Market Prohibition from the China Securities Regulatory Commission" and the "Announcement on the Actual Controller of the Company Receiving the Notice of Case Filing". According to the announcement, due to the company, the actual controller and chairman Chen Xiang suspected of 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, the China Securities Regulatory Commission decided on April 1 to file a case against the company and the company's actual controller and chairman Chen Xiang. On April 28, Chen Xiang received the Notice of Case Filing from the China Securities Regulatory Commission (hereinafter referred to as the "China Securities Regulatory Commission") on suspicion of insider trading in the securities market. The China Securities Regulatory Commission plans to decide to give warnings to Yongyue Technology, Chen Xiang, Zhu Shuibao, and Xu Weida, and impose fines of 13 million yuan, 10.5 million yuan, 1 million yuan, and 700,000 yuan respectively. It is proposed to impose a five-year ban on Chen Xiang from entering the securities market.
Screenshot of Yongyue Technology's announcement
According to the announcement, the company received the China Securities Regulatory Commission (hereinafter referred to as the "China Securities Regulatory Commission") "Notice of Case Filing of the China Securities Regulatory Commission" (No. 0102023019 Zheng Jian Case No. 11) from the China Securities Regulatory Commission (hereinafter referred to as the "China Securities Regulatory Commission") on October 11, 2023. On April 1, 2024, Chen Xiang, the actual controller and chairman of the board of directors, received the Notice of Case Filing of the China Securities Regulatory Commission (No. 0102024007 Zheng Jian Case Filing) from the China Securities Regulatory Commission (hereinafter referred to as the "CSRC"). Due to the company, the actual controller and chairman Chen Xiang suspected of violating laws and regulations in information disclosure, in accordance with the Securities Law of the People's Republic of China, the Administrative Punishment Law of the People's Republic of China and other laws and regulations, the China Securities Regulatory Commission decided to file a case against the company and the company's actual controller and chairman Chen Xiang.
On April 28, 2024, the Company received the Advance Notice of Administrative Punishment and Market Prohibition (No. Su Zheng Jian Jian Zhi Zi [2024] No. 4) issued by the China Securities Regulatory Commission.
According to the notice, after investigation, Yongyue Technology and related parties are suspected of the following illegal facts:
1. Yongyue Technology is suspected of having misleading statements in the temporary announcement of major contracts
(1) The cooperation between Yongyue Technology and Pingyu County, Henan Province on the UAV business in the investment promotion negotiation
Yancheng Yongyue Intelligent Equipment Co., Ltd. (hereinafter referred to as Yongyue Intelligent), a wholly-owned subsidiary of Yongyue Technology, is mainly engaged in the production and sales of unmanned aerial vehicles. From May to August 2023, Yongyue Technology and Pingyu County, Henan Province gradually determined a series of cooperation intentions related to industrial investment promotion in the investment promotion talks, including the implementation of agricultural plant protection drone financial leasing business.
On August 27, 2023, in order to negotiate with the financier for the financial leasing business, Yongyue Intelligent and Pingyu County Changda Transportation Investment and Development Co., Ltd. (hereinafter referred to as Pingyu Changda, a wholly-owned subsidiary of the Transportation Bureau of Pingyu County, Henan Province) signed the "Sales Contract", agreeing that Pingyu Changda would purchase 5,000 drones from Yongyue Intelligence, with a total contract amount of 300 million yuan. At the same time, the two parties signed the Supplementary Agreement, stipulating that the Sales Contract can only take effect after the following four conditions are met: first, the Sales Contract and the Entrusted Operation Agreement The second is that Yongyue Intelligent received the official document issued by the Zhumadian Municipal Government, which clearly instructed that the special funds for the unified defense and rule of agriculture in Zhumadian in the next 8 years will be entrusted to Pingyu Changda to carry out the work of unified defense and governance, and the special funds for unified defense and rule will be paid to the operating company established by Pingyu Changda entrusted by Yongyue Intelligent Organization to pay for the business activities of the operating company; third, Pingyu Changda will set up a special account for the completion of the unified defense and rule business order; fourth, Yongyue Intelligent will receive the "Sales Contract" Under the item, Pingyu Changda should pay 20% of the total price for the purchase of drones, that is, 60 million yuan.
On September 14, 2023, Yongyue Intelligent and Pingyu Changda signed the "Agreement on Termination of Contract", and the two parties agreed to terminate all cooperation and not bear each other's liability for breach of contract. Until the termination of the contract, none of the four conditions stipulated in the Supplemental Agreement had been fulfilled, and the aforesaid Sales Contract remained in a state of ineffect.
(2) Yongyue Technology's information disclosure
On August 28, 2023, the company issued the "Announcement on the Signing of Major Contracts", which only disclosed the "Sales Contract" signed by Yongyue Intelligent and Pingyu Changda on August 27 and the main content of the contract, that is, Pingyu Changda purchased 5,000 drones from Yongyue Intelligence, with a total contract amount of 300 million yuan, and Pingyu Changda must pay 20% of the total contract price within 10 working days after the contract is signed, and 80% of the total contract price must be paid within 1 month. The fact that the Supplemental Agreement was signed and the Sales Contract did not enter into force was not disclosed in the announcement.
On September 5, 2023, the company issued the "Clarification Announcement on Media Reports", disclosing that the contract signed by Yongyue Intelligent and Pingyu Changda is true and valid, and the non-intentional contract also states that the specific use of the drone is agricultural plant protection drone, and suggests that there may be a risk of termination in the future, but the signing of the "Supplementary Agreement" and the fact that the "Sales Contract" has not taken effect have not been disclosed.
On September 18, 2023, the company issued the "Announcement on the Termination of Major Contracts", disclosing for the first time that Yongyue Intelligent and Pingyu Changda signed a "Supplementary Agreement" at the same time as signing the "Sales Contract", and the "Supplementary Agreement" separately stipulates the effective conditions of the "Sales Contract";
The China Securities Regulatory Commission believes that the "Sales Contract" signed by Yongyue Intelligent and Pingyu Changda involves a total amount of 300 million yuan, accounting for 58.94% of the audited net assets of the company's 2022 annual report, which is a major event that should be temporarily announced as stipulated in Article 80, Paragraph 1 and Paragraph 2, Paragraph 3 of the Securities Law of the People's Republic of China (hereinafter referred to as the "Securities Law"). The cooperation between Yongyue Intelligence and Pingyu Changda involves local government investment promotion, and the drone sales contract is a basic contract signed by both parties in order to promote follow-up financing, industrial landing and other matters, and the effectiveness of the contract strictly depends on the achievement of the conditions agreed in the "Supplementary Agreement". The Supplemental Agreement has a decisive impact on the validity of the Sales Contract, but the Company failed to disclose the Supplemental Agreement when disclosing the Sales Contract, resulting in investors failing to be informed in a timely manner that the Sales Contract has not entered into force and whether it will take effect in the future is materially uncertain, and the Company's disclosure behavior fails to accurately explain the causes, current status and possible legal consequences of major events in accordance with the law, and fails to eliminate the impact through a clarification announcement in a timely manner, which is materially misleading. The Company's conduct is suspected of violating the provisions of Paragraph 2 of Article 78 and Paragraph 1 of Article 80 of the Securities Law, and constitutes an illegal act of misleading statement under Paragraph 2 of Article 197 of the Securities Law.
According to the provisions of Paragraph 3 of Article 82 of the Securities Law and the Administrative Measures for Information Disclosure of Listed Companies (Decree No. 182 of the CSRC, hereinafter referred to as the "Information Disclosure Measures"), Chairman Chen Xiang, as the main person in charge of the company's information disclosure affairs, led the signing of drone-related contracts throughout the process, and deliberately concealed it from other directors, supervisors and senior managers of the company, resulting in misleading statements in the temporary announcement of the company's major contracts, and was the person in charge directly responsible for the above-mentioned illegal acts.
2. Yongyue Technology is suspected of failing to timely disclose the occupation of non-operating funds of related parties and major omissions in regular reports
(1) The situation of Yongyue Technology's related persons
Since January 20, 2021, Chen Xiang has been the actual controller of Yongyue Technology. Since February 18, 2021, Chen Xiang has served as the chairman of Yongyue Technology. During the period involved in the case, Chen Xiang actually controlled Yancheng Hongtang Intelligent Technology Co., Ltd. (hereinafter referred to as Yancheng Hongtang) and Shandong Hongtu Intelligent Technology Co., Ltd. (hereinafter referred to as Shandong Hongtu).
According to the provisions of Article 216, Paragraph 4 of the Company Law of the People's Republic of China and Article 62, Paragraph 4 of the "Information Disclosure Measures", Yancheng Hongtang and Shandong Hongtu were related persons during the period involved in the Yongyue Technology case.
(2) Yongyue Technology is suspected of failing to timely disclose the occupation of non-operating funds by related parties
From March 18 to 24, 2022, Yongyue Intelligent transferred 26.457 million yuan to Nanjing Xiesheng Intelligent Technology Co., Ltd. (hereinafter referred to as Nanjing Xiesheng) in the name of prepaid equipment payment, and from March 18 to 30, Nanjing Xiesheng successively transferred all the funds to Yancheng Hongtang, on January 20, 2023, Yongyue Intelligent transferred 9.85 million yuan to Shandong Hongtu in the name of paying the first futures payment, and on March 14, 2023, Yongyue Technology transferred all the funds to Jiangsu Micron Energy Technology Co., Ltd. in the name of paying for equipment transfer(hereinafter referred to as Jiangsu Micron) transferred 30 million yuan, and Jiangsu Micron immediately transferred all the funds to Yancheng Hongtang through Jiangsu Jiade Textile Co., Ltd. on March 14-15, and the above capital transactions belong to the listed companies as stipulated in Article 5, Item 4 of the Regulatory Guidelines for Listed Companies No. 8 - Regulatory Requirements for Capital Transactions and External Guarantees of Listed Companies (CSRC Announcement (2022) No. 26) The listed companies will directly or indirectly provide funds to the controlling shareholders, In the case of the actual controller and other related parties, the aforesaid non-operating funds occupy a total of 66.307 million yuan. Among them, on March 18, 2022, Yongyue Technology incurred a non-operating capital occupation of 18 million yuan by related parties, accounting for 3.36% of the audited net assets of the company's 2021 annual report, which met the disclosure standard of the interim report.
(3) Yongyue Technology is suspected of having major omissions in its periodic reports
From March 2022 to March 2023, Yongyue Technology incurred a total of 66.307 million yuan of non-operating funds occupied by related parties. Among them, the amount incurred in the first half of 2022 was 26.457 million yuan, and the principal returned in the year was 3.5 million yuan, and the balance at the end of the year was 22.957 million yuan, and the amount incurred in the first half of 2023 was 39.85 million yuan, and the principal returned in the year was 24.469 million yuan, and the balance at the end of the year was 38.338 million yuan. The cumulative amount of non-operating capital occupation by the aforesaid related parties accounted for 4.88%, 5.20% and 8.17% of the net assets recorded in the 2022 semi-annual report, 2022 annual report and 2023 semi-annual report, respectively. The above-mentioned occupation constitutes a related party transaction with the company at the same time. Yongyue Technology failed to comply with the provisions of Articles 32 and 39 of the Standards for the Content and Format of Information Disclosure of Companies Offering Securities to the Public No. 3 - Content and Format of Semi-annual Reports (CSRC Announcement (2021) No. 16) and Article 45, Paragraph 1 and Article 54 of the Guidelines for the Content and Format of Information Disclosure of Companies Offering Securities to the Public No. 2 – Content and Format of Annual Reports (CSRC Announcement (2021) No. 15). The disclosure in the 2022 annual report and the 2023 semi-annual report constitutes a material omission.
As of April 15, 2024, the related party has returned all the occupied funds and interest.
The China Securities Regulatory Commission believes that the above two illegal acts of Yongyue Technology are suspected of violating the provisions of Paragraphs 1 and 2 of Article 78, Article 79 and Paragraphs 1 and 2 of Article 80 of the Securities Law, and constitute illegal circumstances under Paragraphs 1 and 2 of Article 197 of the Securities Law.
For the above two illegal acts, in accordance with the provisions of Paragraph 3 of Article 82 of the Securities Law and Paragraphs 1, 2 and 3 of Article 51 of the Information Disclosure Measures, Chairman Chen Xiang, as the main person in charge of the company's information disclosure affairs, organized and planned related parties to occupy the funds of Yongyue Technology, and failed to organize the company to disclose information in a timely manner; Zhu Shuibao, the chief financial officer, is responsible for the company's information disclosure and financial work, and failed to discover and effectively prevent the occurrence of capital occupation in a timely manner, and failed to fully ensure that Yongyue Technology fulfilled its information disclosure obligations in accordance with the law. Prudently performing its duties, when approving Yongyue Technology's procurement and payment applications, it failed to discover and effectively prevent the occurrence of capital occupation in a timely manner, and failed to fully ensure that Yongyue Technology fulfilled its information disclosure obligations in accordance with the law, although it stated that it had fulfilled its duties and responsibilities during the investigation, the reasons expressed were insufficient to support that it had fulfilled its duty of diligence and no other evidence, and the above three people failed to be diligent and conscientious, and were the supervisors directly responsible for the above two illegal acts.
Chen Xiang, the actual controller, organized and carried out the appropriation of Yongyue Technology's funds, resulting in the company's illegal information disclosure, which is suspected of constituting the illegal circumstances of the actual controller's organization and instigation as described in paragraphs 1 and 2 of Article 197 of the Securities Law.
The above-mentioned illegal facts are proved by evidence such as the company's interim reports, periodic reports, records of inquiries by relevant personnel, explanations of relevant circumstances, industrial and commercial materials, bank statements, and financial vouchers.
Based on the facts, nature, circumstances and degree of social harm of the parties' illegal acts, the China Securities Regulatory Commission (CSRC) intends to make a decision based on the above three illegal facts:
1. Give a warning to Yongyue Technology Co., Ltd. and impose a fine of 13 million yuan;
2. Chen Xiang was given a warning and fined 10.5 million yuan;
3. Give Zhu Shuibao a warning and impose a fine of 1 million yuan;
4. Xu Weida was given a warning and fined 700,000 yuan.
As the chairman and actual controller of Yongyue Technology, the party Chen Xiang led, planned, directed, and carried out all the company's illegal acts of information disclosure, and the circumstances of the illegal acts were serious, in accordance with Article 221 of the Securities Law, Article 3, Paragraph 1, Article 4, Paragraph 1, Item 1, and Article 4 of the Regulations on the Prohibition of Entry into the Securities Market (Decree No. 185 of the CSRC). Article 5 and Article 7, Paragraph 1 stipulate that Chen Xiang is to be banned from entering the securities market for five years, and from the date of the announcement of the decision by the Bureau, during the prohibition period, he shall not continue to engage in securities business or securities service business in the original institution or serve as a director, supervisor or senior management of the original securities issuer, nor shall he engage in securities business or securities service business or serve as a director, supervisor or senior management of another securities issuer in any other institution.
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Review: Tan Lugang