Entering ChinaRecently, *ST Changfang announced that the company received the “Administrative Penalty Decision” ([2024] No. 29) issued by the Shenzhen Supervision Bureau of the China Securities Regulatory Commission (hereinafter referred to as the “Shenzhen Securities Regulatory Bureau”) to the relevant responsible persons of Kang Mingsheng, and the “Administrative Penalty Prior Notice” ([2025] No. 1) issued by Changfang Group and its relevant responsible persons.
According to the announcement, the Shenzhen Securities Regulatory Bureau decided to order Li Dichu, then executive director of Kang Mingsheng, Peng Lixin, and deputy general manager Liao Congqi, to make corrections and impose fines of 1 million yuan respectively. At the same time, the Shenzhen Securities Regulatory Bureau intends to give a warning to *ST Changfang and a number of responsible persons for suspected violations of information disclosure laws and regulations, and impose fines ranging from 1 million yuan to 5 million yuan respectively.
Destruction of evidence
377 baskets of financial information were buried
According to the investigation of the Shenzhen Securities Regulatory Bureau, the three responsible persons of Kang Mingsheng destroyed and concealed the documents and materials required by the inspection when they were inspected.
On November 11, 2021, after the Shenzhen Securities Regulatory Bureau issued an inspection notice and provided a list of materials (including subsidiaries), Peng Lixin instructed some employees not to cooperate with the inspection, and organized personnel to package financial accounting materials, delete work computer data, and replace computer hard drives; Liao Congqi arranged for personnel to burn or bury the relevant paper materials, and asked the relevant personnel to delete the computer materials and work WeChat content.
What is even more shocking is that on November 1, 2022, the public security organs seized 377 baskets of buried materials in the factory area of Kang Mingsheng’s Jiangxi subsidiary, which contained materials related to inspection matters such as sales contracts, statements and inventory production and warehousing materials from 2019 to 2021.
During the on-site inspection, the Shenzhen Securities Regulatory Bureau noticed that there was a lack of data in the Dingjie ERP system used by Kang Mingsheng. The system lacks data prior to December 2021. In fact, Kang Mingsheng had already used the financial system for bookkeeping, and Peng Lixin, as the contact person for inspection-related matters, did not cooperate in providing the system’s business and financial data before December 2021 as required.
In addition, they also have the illegal fact of providing false rebate-related materials. In April 2022, when the China Securities Regulatory Bureau asked Kang Mingsheng to conduct a self-examination on the authenticity of the business, Peng Lixin reported to Li Dichu and organized the financial department to deceive.
The Shenzhen Securities Regulatory Bureau believes that these acts violated the provisions of Article 173 of the Securities Law and have constituted illegal acts of refusing and obstructing supervision and inspection under Article 218 of the Securities Law. In addition, the parties’ refusal or obstruction of supervision and inspection was rude, the circumstances were serious, and the nature was vile, and the statements and defenses submitted by them were not adopted.
In accordance with relevant laws and regulations, the Shenzhen Securities Regulatory Bureau decided to order Li Dichu, Peng Lixin, and Liao Congqi to make corrections and impose fines of 1 million yuan respectively. At the same time, the Shenzhen Securities Regulatory Bureau intends to give warnings to *ST Changfang and a number of responsible persons, and impose fines ranging from 1 million yuan to 5 million yuan respectively.
Performance gambling is divided
The “infighting” between the parent and subsidiary has intensified
According to public information, *ST Changfang is mainly engaged in the research and development, design, production and sales of LED off-grid lighting, emergency lighting, electric fans, portable energy storage products and other electronic products and LED lighting source devices. Kang Mingsheng is a leading enterprise in the global off-grid lighting industry, and its product categories cover mobile lighting, home lighting, off-grid household appliances, multi-functional portable energy storage and other fields.
In 2015, in order to expand the LED industry, *ST Changfang spent 528 million yuan to purchase 60% of the shares of Kang Mingsheng held by Li Dichu and others by paying cash and issuing shares, and included Kang Mingsheng in the scope of *ST Changfang’s consolidated statements.
During the performance VAM period, the control of Kang Mingsheng was still in the hands of Li Di’s original management team for a long time. Due to the impact of the new crown epidemic, Kang Mingsheng did not fulfill its performance commitments that year, and *ST Changfang and Kang Mingsheng had a disagreement on the amount of performance compensation. *ST Changfang has repeatedly negotiated with Li Dichu, the founder and former executive director of Kang Mingsheng, and his original management team on matters such as strengthening the control of Kang Mingsheng, and the contradictions between the two sides have intensified, once staged public opinion attacks, listed companies blocking the door and checking the door, and subsidiaries reporting to the police.
On February 6, 2023, *ST Changfang announced that on July 12, 2022, *ST Changfang’s management learned that the original management team of Kang Mingsheng, led by Li Dichu, Nie Wei, Peng Lixin, etc., was suspected of concealing and deliberately destroying accounting documents, and the company immediately arranged personnel to stop and report to the Shenzhen Longhua police.
*ST Changfang said that after two days, a total of 377 boxes (plastic turnover boxes of 50 cm × 40 cm × 30 cm) of original accounting vouchers were excavated, and the pit where the buried data was excavated was about 9 meters long, 5 meters wide and 5 meters deep, and the period to which the data belonged was from 2013 to 2021, and the buried materials were all original vouchers and documents used for accounting.
At that time, Li Dichu publicly stated in an interview with the media that the information was all internal documents of the Jiangxi subsidiary, and did not involve key accounting data and accounting vouchers, and he had no knowledge of this matter.
Since then, *ST Changfang and Kang Mingsheng have both been filed by the regulatory authorities. In February 2023, the China Securities Regulatory Commission decided to file a case against Kang Mingsheng on suspicion of refusing and obstructing the securities regulatory authority and its staff from performing their supervision and inspection duties in accordance with the law. In April 2024, the China Securities Regulatory Commission decided to file a case against *ST Changfang due to suspected violations of information disclosure laws and regulations.
After investigation, the Shenzhen Securities Regulatory Bureau disclosed that these materials include sales contracts, statements, inventory production and warehousing materials from 2019 to 2021 and other materials related to inspection matters. The Shenzhen Securities Regulatory Bureau stated that the parties in this case destroyed and concealed the documents and materials required for inspection, refused and obstructed supervision and inspection, and the means of refusing and obstructing supervision and inspection were rude, the circumstances were serious, and the nature was vile, and their statements and defense opinions were not adopted.
