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On May 28, 2018, SZSE decided to delist the stocks of Ingenious Ene-Carbon New Materials Group Co., Ltd. (hereinafter as “*ST Ene-Carbon” or “the Company”) based on review opinions from the Listing Committee. SZSE answered the following questions from reporters regarding the delisting of the stocks of *ST Ene-Carbon.
Q1: Could you brief us on the situations regarding the delisting of *ST Ene-Carbon?
A: The delisting of *ST Ene-Carbon has undergone three major stages.
Stage 1: On May 4, 2016, a disclaimer of opinion was issued in the audit report on the company’s 2015 financial accounting report. According to SZSE’s Rules Governing Share Listing, the Company was issued a delisting risk warning. The company subsequently corrected the accounting errors in its 2015 financial accounting report and the corrected financial accounting report disclosed that the company had suffered from operating losses for two consecutive fiscal years of 2014 and 2015.
Stage 2: On June 24, 2017, the company disclosed its 2016 annual report. Due to its negative net profit for three consecutive fiscal years, the company’s listing was suspended from on July 6, 2017 according to SZSE’s Rules Governing Share Listing.
Stage 3: On April 28, 2018, the 2017 annual report disclosed by the company revealed that the company’s financial accounting report was issued a disclaimer of opinion in the audit report. Tefore, according to Article 14.4.1(5) of SZSE’s Rules Governing Share Listing, *ST Ene-Carbon shall be delisted compulsorily. Pursuant to SZSE’s Rules Governing Share Listing and the Self-disciplinary Regulation Hearing Procedure, upon request of the company, the Listing Committee of SZSE held a hearing on May 24, 2018 on the delisting the stocks of *ST Ene-Carbon, and listened to the company’s defense opinions. After the hearing, the Listing Committee of SZSE held a meeting to review the issues regarding the delisting. The Listing Committee concluded after the meeting that, the delisting of *ST Ene-Carbon was in compliance with relevant regulations of SZSE’s Rules Governing Share Listing, and agreed to delist *ST Ene-Carbon. On May 28, 2018, SZSE made a decision to delist *ST Ene-Carbon based on the review opinions of the Listing Committee and announced it to the public.
Q2: Would you brief us on the hearing on the delisting of *ST Ene-Carbon?
A: According to SZSE’s Self-disciplinary Regulation Hearing Procedure, the party concerned in the hearing on delisting shall be a listed company. Investor in a listed company is not a party concerned in the hearing, and there is no review process in the hearing procedure. In the course of delisting review, and before the decision of delisting is made, the listed company is entitled to apply for a hearing. Where a listed company applies for a hearing, the company’s legal representative or an employee authorized by the legal representative and familiar with the hearing procedures shall participate in the hearing.
On May 15, 2018, *ST Ene-Carbon submitted a hearing application. On May 24, SZSE Listing Committee held a hearing on the delisting of *ST Ene-Carbon, explaining the facts, grounds and rules that lead to the decision of delisting, and listening to the defense opinions of *ST Ene-Carbon. Thanks to the hearing, SZSE’s reviewing process becomes more standardized and rigid, and the market player’s understanding of the supervision rules of SZSE was further improved, and its rights to know, to participate, and to express were effectively guaranteed, which helps market participants reach consensus and jointly ensure the sound and stable operation of the market. Members of the SZSE Listing Committee participated in the hearings on spot and obtained more detailed and accurate evidence and relevant information through the hearing, which helps them better understand and implement the rules, as well as improves the scientific and standardized level of major regulatory decisions.
Q3: Would you briefly explain the basis for delisting *ST Ene-CarbA: In 2012, SZSE revised relevant provisions of the Rules Governing Share Listing on the delisting system, adding delisting conditions such as being given modified audit opinions, and failure to disclose annual report within the statutory time limit following listing suspension. When the financial report of a listed company is given a disclaimer of opinion or an adverse opinion in its audit report, it means that the performance of the listed company is not credible, and could not serve as basis for making right investment decisions. The delisting of *ST Ene-Carbon is caused by the modified audit opinions given in its audit report. It should be pointed out that since the annual financial report of a listed company must be audited by an accounting firm. Failure of a company whose stocks are suspended for listing to disclose the audited annual report before April 30 due to insufficient audit time or for other reasons shall also trigger a delisting. The rules and basis for and the implementation of delisting *ST Ene-Carbon are as follows:
First, the rules and basis. Article 14.4.1 of SZSE’s Rules Governing Share Listing stipulates that, whether the company is profitable, when a company’ first annual report following the listing suspension shows that the company’s financial report is given a qualified opinion, a disclaimer of opinion, or an adverse opinion, SZSE will delist the stocks of the company.
Second, the implementation. The 2017 annual report of the Company disclosed following listing suspension revealed that Zhongxinghua Certified Public Accountants LLP issued a disclaimer of opinion in the audit report on the company’s financial report. According to Article 14.4.1(5) of SZSE’s Rules Governing Share Listing, *ST Ene-Carbon shall be delisted. Based on the review opinions of the Listing Committee, SZSE made the final decision to delist *ST Ene-Carbon. The decision is objective and based on clear facts and evidence.
In addition, pursuant to Article 14.4.4 of SZSE’s Rules Governing Share Listing, SZSE makes the decision on whether to delist the stock of a company within 15 trading days after the company’s annual report is disclosed. According to Article 20 of the Self-disciplinary Regulation Hearing Procedure, the period from the date a company applies for hearing till the conclusion of the hearing is not included in the time limit for making a self-regulatory decision. With the period from the day of the hearing application of the Company till the conclusion of the hearing excluded, SZSE spent 11 trading days making the decision of delisting *ST Ene-Carbon, which is in compliance with the relevant provisions of SZSE’s Rules Governing Share Listing.
Q4: After the delisting decision is made, a company’s stocks shall enter the delisting transitional period. What issues should investors pay attention to?
A: On May 28, 2018, SZSE announced its decision to delist the stocks of *ST Ene-Carbon to the public. According to Articles 14.4.23 and 14.4.26 of SZSE’s Rules Governing Share Listing, the Company’s stocks entered the delisting transitional period as of June 5, 2018, with a trading period of 30 trading days, and its stock abbreviation was be changed to “Ene-Carbon Delisting”, and daily stock price fluctuation was limited to 10%. SZSE will delist the stocks of the Company on the next trading day at the expiration of the delisting transitional period. Pursuant to Article 12 of the Delisting Transitional Period Special Provisions, individual investors may purchase stocks of a delisted company during the delisting transitional period provided that they have more than two-year experience in stocks trading, and that their securities assets are not be less than CNY 500,000.
The delisting transitional period provides a trading opportunity to investors of a delisted company, with the aim of releasing risks. Investors should read through relevant notices issued by the Company and the Delisting Transitional Period Special Provisions. Investors need to pay high attention to the investment risks in a company to be delisted and be careful about buying of its stocks.
Q5: Could a company’s stocks be transferred after being delisted?
A: According to Article 14.4.28 of the Rules Governing Share Listing, the company should complete relevant work in a timely manner to ensure the entry of its stock to the National Equities Exchange and Quotations (hereinafter as “NEEQ”) system for listing and transfer within 45 trading days following the expiration of the delisting transitional period. SZSE will urge the company to fully disclose arrangements regarding investor equity confirmation, registration, and custodianship, as well as company contact information and ways for learning about the company, so as to protect the legitimate rights and interests of investors.
According to provisions in NEEQ Interim Measures on the Transfer of Shares for STAQ and NET Companies and Delisted Companies, shareholders must re-perform equity confirmation, registration, and custodianship procedures in accordance with relevant regulations before transferring their shares. For details about how investors may re-perform the equity confirmation, registration, and custodianship procedures and how to transfer the shares of a delisted company through the NEEQ system, please visit the website www.neeq.com.cn.
Q6: Could a company’s stocks be relisted after being delisted?
A: After the listing is terminated, the company may submit a relisting application to SZSE if it meets the relisting conditions. Section 5 of Chapter 14 of the Rules Governing Share Listing provides principles for relisting, and Measures for Relisting of Delisted Companies (hereinafter as “Measures”) of SZSE provides detailed procedures. Relisting conditions mainly cover the following aspects.
First, basic requirements for a delisted company, covering the share capital, shareholder distribution, audit opinions in the last three fiscal years, annual profit in the last three fiscal years, annual cash flow in the last three fiscal years, net assets at the end of the last fiscal year, and matters regarding main business in the last three years, etc., apart from the requirement that the company have no major violations in the last three years.
Second, time interval for the relisting application. According to the Measures, a relisting application may be filed only 12 months after the company’s stocks enter the NEEQ system.
For relisting applications, SZSE will carry out rigid review in compliance with laws and regulations and, if necessary, ask relevant institutions to verify the truthfulness of the company’s profitability and relevant matters. The Listing Committee of SZSE will review the application and make independent and professional judgments before forming their review opinions. Based on review opinions of the Listing Committee, SZSE decides whether to approve the relisting application. As delisted companies are highly risky, investors should be careful about speculating in their stocks.
Q7: What are the methods for investors to protect their legitimate rights during the delisting process?
A: During the delisting process, investors may legitimately claim their rights as shareholders. The current system provides multiple channels for protecting the legitimate rights of small and medium investors.
First, after the listing is terminated, shareholders of the company can still exercise their rights as shareholders based on laws. Listing termination is an ordinary market behavior. Although the shares of a delisted company cannot be traded on SZSE, the assets, liabilities, profits and losses of the company remain the same. In addition, the company should abide by the Company Law and other provisions and continue to fulfill relevant obligations and social responsibilities assigned to public enterprises, ensuring that the legitimate rights and interests of its shareholders are intact despite the change to the company’s listing status.
Second, shareholders may protect their legitimate rights through proper judicial channels. According to Provisions of the Supreme People’s Court on Trying Cases of Civil Compensation Arising from False Statement in Securities Market, in the case that an investor suffers from losses as a result of the obligator’s violation of laws and regulations concerning information disclosure and false statement, the investor may file a civil lawsuit against the obligator for compensation on the ground that his or her legitimate rights are infringed by the false statement.
Q8: What regulatory measures has SZSE taken during the delisting of *ST Ene-Carbon?
A: During the period from May 4, 2016 when the delisting risk warning was issued to the time when the final delisting decision was made, SZSE had been continuously urging the Company to fully disclose delisting risks and reminding investors of the delisting risk, therefore protecting the legitimate rights and interests of investors.
First, SZSE has been strengthening the regulation of information disclosure of listed companies in accordance with laws and regulations. Since the Company was issued with the delisting risk warning and became a high-risk company, SZSE strengthened supervision on its information disclosure and actively urged the Company to disclose information in a timely, truthful, accurate, complete, and fair manner. Prior to the listing suspension of *ST Ene-Carbon, SZSE paid much attention to risky issues concerning confirmation of proceeds from sale of equities in the Company’s subsidiaries and the possible failure to disclose periodic reports by the Company, and had adopted a series of regulatory measures in a timely way, issuing multiple regulatory letters and publicly questioning the compliance of relevant accounting treatment and quotation of the CPA’s individual professional opinions, and requiring the Company to fully disclose its major risks. At the same time, at the discovery of any risks and problems, SZSE promptly brought them to the attention of relevant departments or requested investigation therefrom.
Second, SZSE has been continuously urging the Company to fully disclose delisting risks to protect the legitimate rights and interests of small and medium investors. After *ST Ene-Carbon’s listing was suspended, SZSE has been urging the Company to disclose progress of the work conducted during the suspension and asking the company to fully disclose the delisting risks provided that the Company, during the suspension of listing, records a loss in its annual result, or fails to disclose the first annual report in the statutory period following the suspension, or receives a disclaimer of opinion or an adverse opinion on its financial reports. Moreover, SZSE has also issued regulatory letters for several times, requesting the Company to retain an auditor for its 2017 financial report as soon as possible and urging it to resolve the delisting risks.
Third, SZSE has taken prompt regulatory measures and disciplinary actions against *ST Ene-Carbon regarding its violations. The Company failed to disclose the 2016 annual report as of April 30, 2017. Furthermore, there was a major discrepancy between the 2016 business performance forecasted and that disclosed in the 2016 periodic reports and the Company failed to disclose the correction notice. For the above reasons, SZSE has made public censure and taken other disciplinary actions against the Company, relevant parties, and auditors in strict accordance with laws and regulations. After the listing suspension, SZSE had sent a letter of concern to the Company and the accounting firm regarding the 2017 performance forecast with a profit result disclosed by the Company, and urged the Company to truthfully and accurately disclose the annual performance after prudent review.
Q9: Currently, what other concerns does SZSE have for strictly implementing the delisting system?
A: The delisting system for listed companies is important and fundamental to the capital market and significant for purifying market environment, optimizing resources allocation, promoting the winnowing mechanism and perfecting market mechanisms. Through the efforts of China Securities Regulatory Commission (hereinafter as “CSRC”) and with reference to the experience of mature markets, SZSE has established, within the existing framework of laws, a diversified and market-oriented system of delisting indicators and a stable and rigid listing implementation mechanism in the capital market. Stock delisting is gradually “regular, law-based and market-oriented”. Meanwhile, market players’ understanding and recognition of the delisting system has also been greatly improved. The delisting system is fundamental to maintaining a healthy stock market, and investors ought to respect the market rules.
Next, SZSE will thoroughly implement the spirit of the 19th CPC National Congress and the National Financial Work Conference, implement the principle of full and strict supervision pursuant to laws, and strictly work out the entities’ responsibility for the delisting under the guidance of the CSRC. On the one hand, strict guard will be placed on delisting implementation, with any company that triggered the conditions for delisting being delisted. On the other hand, implementation system for mandatory delisting due to major violation of laws will be further improved, and the delisting index system for delisting due to financial or market factors will be optimized, intensified risk warnings will be put on the high-risk companies with questionable ability of going-concern or with major uncertainties. The foundation of the system will be further reinforced, so as to prevent systemic financial risks, and promote healthy and stable development of the SZSE's multi-tiered capital market.
