April 30 was the deadline for listed companies to file their annual report and first-quarter report. On the evening of April 27 five companies including Chengdu Huaze Cobalt and Nickel Material Co., Ltd. (“*St Huaze”), Shenzhen Kondarl (Group) Co., Ltd. (“Kondarl”), Shandong Geo-mineral Co., Ltd. (“Shandong Geo-mineral”), Kaidi Ecological and Environmental Technology Co., Ltd. (“Kaidi Ecological”) and Hunan Chinasun Pharmaceutical Machinery Co., Ltd. (“Chinasun Pharmaceutical Machinery”) disclosed that they would not be able to meet the deadline for the 2017 annual report and 2018 first-quarter report. Therefore, Shenzhen Stock Exchange (“SZSE”) initiated the disciplinary procedure on the forgoing five companies and those responsible, and filed for investigation.
Periodic reports, especially annual reports, are an integral part of the mandatory information disclosure imposed upon listed companies, as well as an important source of information via which investors may thoroughly learn about the business operation and financial status of listed companies, as expressed by an officer from SZSE. SZSE, upholding the law-based and comprehensively strict regulatory philosophy, and highly concerned about the legitimate rights and interests of investors, especially those of small and medium investors, had requested listed companies and auditors via phone calls and letters of concern to duly prepare their periodic reports and fully reveal relevant risks to the market in time. As regards *ST Huaze’s failure to pay for 2017 annual auditing, apart from sending 4 letters of inquiry and concern, SZSE had also talked with the auditor and urged the company to timely disclose relevant risks. With respect to the setbacks encountered at two shareholder general meetings of Kondarl concerning the appointment of annual auditors, SZSE had issued two letters of concern requesting the company to conduct annual report auditing as early as possible and to timely inform the market that the Company might not be able to meet the deadline for the report. Besides, SZSE had also sent two letters of concern to Shandong Geo-mineral on a year-end transaction -- to set up a subsidiary with real estate properties -- that turn the company around, and urged the company to duly disclose financial information in accordance with laws and regulations. As to the massive loss reported by Kaidi Ecological contrary to what was previously forecasted, SZSE took a series of regulatory measures including sending letters, conducting interviews and suspending trading of the bonds. Furthermore, SZSE had also sent letters to Chinasun Pharmaceutical Machinery with regard to its violations in providing external guarantee in the amount of hundreds of millions and its debt defaults, urging it to fully disclose relevant risks and to duly forecast its annual report.
Conducting periodic reporting within the statutory period prescribed is a rule that must be complied with, said the officer from SZSE. There are stringent provisions on the time limit for disclosure of periodic reports in the Securities Law, the Administration Measures on Information Disclosure of Listed Companies, the Shenzhen Stock Exchange Stock Listing Rules, and the Shenzhen Stock Exchange Stock Listing Rules for the ChiNext Board. SZSE shall implement strict supervision and in no event tolerate listed companies’ violations of the rule.
As per relevant provisions of the Stock Listing Rules on failures to conduct periodic reporting within the statutory period, trading of stocks of *ST Huaze, Kondar, Shandong Geo-mineral, and Kaidi Ecological were suspended as of May 2; Delisting risk warning shall be imposed on the stocks if the listed companies fail to disclose their annual reports within 2 months after the trading suspension; Listing of relevant stocks shall be suspended if the company fail to disclose their annual reports within 2 month after the delisting risk warning; and the stocks shall be delisted if the companies are yet unable to disclose the reports within 2 months after the listing suspension. Pursuant to the Stock Listing Rules for the ChiNext Board, stock trading shall be suspended on the day of May 2 for Chinasun Pharmaceutical Machinery. In case of failure to disclose the annual report before June 30, listing suspension shall be imposed. If the company are still unable to disclose its annual report within one month after the listing suspension, its stocks shall be delisting from ChiNext board.
An officer from SZSE emphasized that, information disclosing obligators such as listed companies, all directors, supervisors, and senior executive shall strictly abide by the Company Law, Securities Law, the Administration Measures on Information Disclosure of Listed Companies and other laws, administrative regulations, and rules issued by relevant departments and authorities, as well as the Stock Listing Rules, timely and duly perform their obligations to disclose the annual reports and make sure that all information contained therein are authentic, accurate and complete. SZSE shall continue to deepen comprehensive and strict regulation in accordance with laws, duly perform its duty of frontline regulation, and uphold the principle to govern the market by rule of law; sternly investigate and deal with violations with zero tolerance, continue to purify the ecosystem of the market, and protect the legitimate rights and interest of investors, especially those of small and medium investors.
