.jpg)
The delisting system of listed companies is an important basic system of the capital market. The advancement of the reform of the delisting system and the establishment of a regular delisting mechanism are important decisions and plans made by the CPC Central Committee and the State Council, as well as an important institutional arrangement that matches the registration-based IPO system and maintains zero tolerance for severe dishonest individuals and organizations, which are of great significance to the improvement of resource allocation and protection of the legitimate rights and interests of investors.
In January 2019, Kangdexin Composite Material Group (KDX) was investigated by the China Securities Regulatory Commission (CSRC) for failure to redeem CNY 1.5 billion of short-term commercial paper on schedule and doubtful financial results. The company, since the investigation, had continuously disclosed risk warning announcements, indicating the potential mandatory delisting risk for major violation of law and reminding investors of investment risks. On 22 September 2020, the CSRC formally imposed an administrative penalty for KDX’s illegal activities including financial fraud, which required the company to make retroactive adjustment on its financial statements from 2015 to 2018. On 28 February 2021, KDX disclosed its retroactively adjusted financial statements, which showed that the company’s corrected net profits from 2015 to 2018 were –CNY 1,481 million, -CNY 1,755 million, -CNY 2,460 million and –CNY 2,357 million, respectively. The net profits were negative for four consecutive years, meeting the condition of mandatory delisting for major violation of law.
KDX’s inflating profits and other illegal acts have been proven by clear facts and conclusive evidence. Its violations lasted for a long time, and involved a large amount of money and malicious measures, which seriously damaged the market integrity foundation. Next, SZSE will earnestly practice the “system building, non-intervention, zero tolerance” policy, adhere to the principles of “standing in awe of the market, rule of law, professionalism and risks and obtaining support from various parties, and implement the market-based, rule-of-law based and normalization requirements. We will resolutely fulfill our primary responsibility of delisting and promote the delisting of KDX in accordance with laws and regulations. Committed to upholding the seriousness and authority of the delisting system, SZSE will make all-out efforts to delist companies seriously disrupting the market order and meeting the delisting conditions, crack down on companies seeking to avoid delisting through malicious acts, smooth the market delisting channel, and promote the formation of a market mechanism advocating survival of the fittest. By doing so, SZSE aims to enhance the quality of listed companies, protect investors’ legitimate rights and interests, and maintain an open, just and fair market order.
