Shanghai Stock Exchange: Publicly condemned ST Ronghua and its related parties for their illegal guarantees

The Paper's reporter Sun Mingwei

The Shanghai Stock Exchange (hereinafter referred to as the "SSE") imposed penalties on Gansu Ronghua Industrial (Group) Co., Ltd. (hereinafter referred to as "ST Ronghua", stock code: 600311) and its controlling shareholders, related parties and relevant responsible persons for their illegal guarantees.

On October 25, the Shanghai Stock Exchange issued a disciplinary punishment letter to seriously deal with the illegal guarantee behavior of ST Ronghua and its controlling shareholders, related parties and relevant responsible persons, and to pursue the responsibility of the responsible entities for the damage to the interests of the listed company caused by the implementation of the illegal guarantee.

It was found that st Ronghua provided three joint and several liability guarantees in 2017 for the financial leasing and borrowing of the controlling shareholder, Wuwei Ronghua Industry and Trade Group Co., Ltd. (hereinafter referred to as "Ronghua Industry and Trade") and its related party, Wuwei Ronghua New Agriculture Co., Ltd. (hereinafter referred to as "Ronghua Agriculture").

First, in January 2017, due to the financial leasing matters of Ronghua Industry and Trade and Ronghua Agriculture, the company provided a joint and several liability guarantee involving a guarantee amount of 150 million yuan; second, in April 2017, due to the financial leasing of Ronghua Industry and Trade, the company provided a joint and several liability guarantee involving a guarantee amount of 150 million yuan; third, in April 2017, due to the loan loan entrusted by Ronghua Agriculture, the company provided a joint and several liability guarantee for it, involving a guarantee amount of 150 million yuan.

The total amount of the above-mentioned related party guarantees is 450 million yuan, accounting for 54.4% of ST Ronghua's audited net assets at the end of the previous year. However, ST Ronghua did not perform the deliberation procedures of the board of directors and the shareholders' general meeting on the aforementioned related party guarantee matters, nor did it disclose them in a timely manner. It was not until November 28, 2020 that ST Ronghua disclosed the above matters in the litigation announcement, and the relevant secured debts were overdue.

In addition, ST Ronghua was sued by creditors for the above-mentioned guarantee matters, and according to the court's judgment, the company should bear the liability for repayment of one-half of the debts (including rent arrears, related expenses and expected interest) of Ronghua Industry and Trade and Ronghua Agriculture, and the total amount of rent owed was 154 million yuan, accounting for 166% of the absolute value of the company's audited net profit in 2019. The Company did not disclose the above-mentioned litigation and the actual assumption of guarantee liability in a timely manner, and did not disclose it in the litigation announcement until November 28, 2020.

The SSE pointed out that the listed company provided a large amount of guarantees to the controlling shareholders and their related parties, failed to perform the decision-making procedures of the board of directors and the shareholders' general meeting in accordance with the requirements of the rules, and did not fulfill the information disclosure obligations in a timely manner. The above-mentioned guarantee debt has been overdue and involves litigation, and the company needs to bear the liability for repayment, which may cause the company to suffer significant losses, but the company has not disclosed the follow-up guarantee overdue and the progress of the litigation matters in a timely manner, which has affected the reasonable expectations of investors. The above conduct seriously violated Article 2 of the Notice on Several Issues Concerning the Regulation of Capital Transactions between Listed Companies and Related Parties and the External Guarantees of Listed Companies, as well as Articles 1.4, 2.1, 2.3, 9.11, 9.15, 10.2.6, 11.1.1, 11.1. 12.5 and other relevant provisions of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (hereinafter referred to as the "Stock Listing Rules").

In addition, WUWEI Ronghua Industry and Trade Group Co., Ltd., the controlling shareholder of ST Ronghua, and its affiliate Wuwei Ronghua New Agricultural Co., Ltd., accepted a large amount of guarantee from the company in violation of the law and failed to ensure that the company operated in accordance with the law, and was mainly responsible for the company's above-mentioned violations.

At the same time, Liu Yong, then chairman and general manager of ST Ronghua, as the first responsible person for the company's business decision-making and information disclosure, Xin Yongqing, then secretary of the board of directors, was the specific person in charge of the company's information disclosure affairs, and Li Qinghua, then financial director, as the specific person in charge of the company's financial management, failed to be diligent and responsible for the company's illegal guarantee.

In view of the above-mentioned facts and circumstances of the violation, the SSE made the following disciplinary decision: ST Ronghua and its controlling shareholder, Ronghua Industry and Trade, related party Ronghua Agriculture, Liu Yong, then chairman and general manager of the company, Xin Yongqing, then secretary of the board of directors, and Li Qinghua, then financial director, were publicly reprimanded.

The Shanghai Stock Exchange said that in the next step in the daily supervision process, it will further strengthen accurate supervision and classified supervision, do a good job in investigating and handling violations, and guide and urge listed companies to standardize operations and operate steadily.

Editor-in-Charge: Wang Jie

Proofreader: Yijia Xu