*ST Gaosheng (000971): One Party To Upgrade The Internal Game To Dismiss The Chairman And The Other To Dismiss The General Manager.

With the announcement of the two paper bill, the *ST 000971.SZ has become more and more powerful.

In July 2018, Gaosheng holdings were exposed by Wei Zhenyu, the actual controller of the company, for violation of related party guarantee. Since then, the Shenzhen stock exchange sent a number of letters of concern to Gaosheng holdings, and Gaosheng holdings have gradually disclosed the actual control of illegal guarantee, occupation of company funds, internal control and other issues.

In the evening of August 1st, *ST announced that Yu Ping and Weng yuan, the second main forces within the company, had taken the initiative to remove directors of 3 people including Wei Zhenyu, Li Yao and Zhang Yiwen. At the same time, Wei Jiang, Fang Yu and Ye Zhengmao will be added as three directors.

At present, Ping Ping is the chairman of Gaosheng technology company of *ST high rise company, and holds 8.47% of Gaosheng holdings in Ping and Weng yuan, both of which hold 16.54%. The three person who proposed the recall was Wei Zhenyu, the actual controller of the company. Li Yao served as the chairman of the company. Zhang Yiwen was the chief financial officer and the acting director, and three of them were directors of the Wei family. Wei Jiang is general manager of *ST.

In addition, there will be another important topic to be held in the first provisional shareholders' meeting in September 11th, namely, deliberation on the issue of illegal guarantees and joint borrowing which has led to the transformation of the company into ST.

This immediately aroused the current rebounding of real controllers. In August 2nd, the *ST high rise announcement said that the board of directors was convened on the same morning by means of a communication vote, and passed the motion of general manager of the dismissal of the company with 7 votes in favour and 4 votes against it. Li Yao, chairman of the board of directors, said Wei Jiang, general manager, "lacks the necessary and basic management skills, management experience and basic operational knowledge of the general manager of listed companies, which has led to the deterioration of the operation of listed companies and their subsidiaries and seriously hindered the development of listed companies". While the opposition party believes that "the current board has lost its impartiality" and "how deep is this black hole"? Shocking endlessly! "

An important shareholder of *ST told reporters that the motion was ridiculous. "As the two independent directors said, the motion did not submit any evidence and evidence to the board of directors, which could not prove the rationality of the resolution. This is the abuse of authority by the chairman, which is a serious damage to the interests of all shareholders of the listed company. "

As of press time, the reporter called *ST Gaosheng several times, but no one answered.

Competition for seats

The resolution issued by the board of supervisors on August 1st showed that Ping and Weng yuan had sent relevant letters to the board of directors on 15 July, and requested the board of directors to convene a provisional shareholders' meeting, and sent an e-mail to the Secretary of the board of directors and all directors on the same day.

Statistics show that Yu Ping founded Jilin Gaosheng in 2006 and is now chairman of the board. Weng Yuanhe and Yu Ping worked together as directors and deputy general managers. Gaosheng technology was successfully acquired by Gaosheng holding company of listed company in 2015. After gaining a high stake, the company became a member of the strategic committee, director and general manager of the listed company, and left office in February last year. According to a person close to Ping, he had left the company at Ping once, but the subsequent listed companies had been in deep trouble because of the violation guarantee, and their shares were also implicated. Only then did they return to the company to drive the current real controller weichi faction out of the board of directors and remanage the company themselves.

But the meeting did not go well. Li Yao, chairman of the board of directors, said: "the proposals of shareholders at Ping Heng Weng yuan fail to submit basic legal documents such as identity certificates and stock certificates in accordance with the requirements of laws, regulations and normative documents. Before the receipt of these necessary basic legal documents, I can not review and convene the board of directors for consideration."

In July 26, 2019 and July 29th, Yu Ping and Weng yuan submitted relevant letters to the board of supervisors. The board of supervisors agreed to convene the provisional shareholders' meeting with the result of 3 votes in favour, 0 votes against and 0 abstentions. Li Yao said, "bypassing the board of directors, directly requests the board of supervisors to convene the shareholders' meeting and submit relevant proposals in the absence of the articles of association. The procedure is in serious violation of the provisions of the articles of association."

The above important shareholders told reporters, "Yu Ping, Weng yuan each holds *ST 8.27% of the shares, holding a total stake of 16.54%. *ST Gaosheng's articles of association stipulates that a shareholder who holds more than 10% of the shares of a company individually or collectively has the right to request an interim shareholders meeting to be requested by the board of directors. If the board of directors does not agree to convene an interim shareholders' meeting or if it fails to give feedback within 10 days after receiving the request, the shareholders shall have the right to propose a provisional shareholders meeting to the board of supervisors.

The convening of the provisional shareholders' meeting, Ping and Weng yuan put forward seven bills: stepping up the solution of the company's illegal guarantee and common lending problems, eliminating Wei Zhenyu, Li Yao and Zhang Yiwen's ninth board directors' duties, and adding Wei Jiang, Fang Yu and Ye Zhengmao to the ninth board of directors. The announcement shows that Fang Yu is deputy general manager of Beijing Hualin Communication Technology Co., Ltd., Ye Zhengmao is the technical director of Gaosheng Technology Co., Ltd., Jilin.

This is not the first time that Ping and Weng yuan have proposed a motion to remove directors. According to the announcement of the company's reply to the letter from the Shenzhen Stock Exchange in February 15th, in January 20, 2019, the 9 shareholders were sent an e-mail to the board of directors on the proposal of a temporary meeting of the board of directors of the company. The proposal was to remove Wei Zhenyu, Li Yao, Zhang Yiwen and Sun Peng from four board directors. Eventually, however, the motion was withdrawn.

And this time, "the original intention is to safeguard the interests of listed companies," he told reporters. "We hope to step up efforts to solve the problem of illegal guarantees and joint loans, and the company can return to the right track as soon as possible."

On the other hand, in August 2nd, the incumbent chairman Li Yao presented a counterattack bill. The listed company disclosed that the board of directors adopted the motion on dismissing the general manager of the company in August 2, 2019, and the general manager Wei Jiang was dismissed. The board of Directors voted 7 votes in favour and 4 votes against the bill.

Li Yao, chairman of the board of directors, said that since Wei Jiang became general manager in December 12, 2018, he failed to take the initiative to implement the special audit requirements of the board of directors of the listed companies to his subsidiaries, failed to achieve the basic control of the listed companies to the subsidiaries, and did not coordinate the profit distribution of the subsidiaries, even leading to the lack of necessary operating capital for the listed companies. More importantly, Wei Jiang failed to effectively integrate the resources of listed companies and listed companies, and failed to form a path to achieve the basic strategic objectives of listed companies. The lack of general manager's necessary and basic management skills, management experience and basic knowledge of operation of the listed companies led to the deterioration of the operation of listed companies and their subsidiaries and seriously hindered the development of listed companies.

After the meeting, Xu Lei, director of the board of directors, said that the board of directors had lost its impartiality. In the case of Bi Tian fortune and Shanghai Xi Lin violation guarantee case, it was suspected of signing many directors and independent directors. At present, the directors concerned should not have the right to vote for all voting rights, and can not prove whether there is any continuing conspiracy against the interests of listed companies. Xu Lei also brought out the feedback from his subsidiaries including Hua Qi Communications Co., Ltd. and CTO Tang, proving that Wei Jiang is an excellent manager with a sense of justice and professional ethics.

Director Xu Lei also pointed out that "in July 29, 2019, the board of directors approved the adoption of the" motion on extending the validity period ", of which first of the fifth articles stated that the use and payment of the seal must be approved by both the chairman and the general manager at the same time. On the second day of July 30th, chairman Li Yaoli proposed to hold a board meeting to dismiss Wei Jiang, general manager of the company. There may be a risk that someone may exclude the supervision of general manager Wei Jiang, control the use of seals and pay capital in his hands.

Two factions wrestling

In July 2018, Gaosheng holdings were exposed by Wei Zhenyu, the actual controller of the company, for violation of related party guarantee. Since then, the Shenzhen Stock Exchange has issued many letters of concern to Gaosheng holdings. For a while, the lid of Gaosheng holdings was uncovered.

According to the announcement, *ST's 2018 year financial report was issued with an audit opinion that could not be expressed. The accounting firm said its "formation of the basis for inability to express opinions" was mainly due to the fact that Wei Zhenyu and Li Yao had privately used the company's official seal without the approval or authorization of the shareholders' meeting or the board of directors. The company used the name of the company as a common borrower or guarantor to guarantee the financing of the controlling shareholders and related parties and the actual controller. Due to the failure of large shareholders and related parties to repay their loans in time, the company was judicature ordered and the company's bank accounts were frozen by law, which affected the normal production and operation of the company.

Since April 30th this year, the unit has been warned of the risk of delisting, which is changed from "ST rise" to "*ST rise".

*ST Gao Sheng 2018 annual report shows that failing to fulfill the resolution procedures of the board of directors and shareholders' meeting, the company's violation of the accumulated principal and interest guarantee for the actual controller and its affiliates is 1 billion 767 million yuan. The company achieved operating income of 901 million yuan in 2018, an increase of 3.76% over the same period last year, and a profit of -15.25 billion yuan, representing a decrease of 1 billion 713 million yuan over the same period last year, of which 620 million yuan was recorded as a result of the violation.

Yu Ping and Weng yuan proposed to recall Wei Zhenyu, Li Yao and Zhang Yiwen at the beginning of this year. They asked the Wei family to take out relevant assets to relieve the violation guarantee and make up for the listed companies or to pay debts.

At present, from the equity ratio, the largest shareholder of *ST is Beijing Yu Chi Reed Investment Co., Ltd. (hereinafter referred to as "Yu Chi Reed"), with a shareholding ratio of 14.57%. The second largest shareholder is Lan Ding Industrial (Hubei) Co., Ltd. (hereinafter referred to as "blue tripod industry"), with a shareholding ratio of 13.37%. The actual control of Yu Chi Reed and LAN Ding is Wei Zhenyu. Yu Ping and Weng yuan each hold 8.27% of *ST shares, and the total shareholding is only about 16.54%.

The above important shareholders told the Economic Observer newspaper that "at present, both Reed and LAN Ding of the Weis family have entered bankruptcy proceedings. The Wechsler family is no longer a real controller of the listed company, and the Weis family and Gaosheng holdings have no common interests relationship."

In July of this year, Yu Chi Reed and LAN Ding were successively accepted by the court for bankruptcy application. This is interpreted by some shareholders as a stalling tactic, intended to delay equity auctions and gain time for control.

Prior to that, *ST's rise was two times in late June 2019, respectively. Yu Chi Reed and LAN Ding held 22 million 650 thousand shares and 55 million 360 thousand shares to be auctioned respectively. The company disclosed in early July this year, from 10 hours in July 30th to 10 hours in July 31st (except for time lapse), on the Alibaba judicial auction network platform of the second middle court of Beijing, the company opened 101 million shares of restricted shares sold by auction companies Yu Chi Reed. At that time, the company said that if the auction and the auction were finally concluded, it would lead to changes in the actual control of the company.

The bankruptcy proceedings resulted in the suspension of some equity auctions. In July 12th, *ST Gao Sheng announced that Yu Chi Reed was adjudication of bankruptcy application by the court. In July 11th, the court of Fangshan issued a notice to inform the Executive Office of the second middle court of Beijing that it had decided to suspend the civil enforcement procedure for Yu Chi Reed's company stock.

It is understood that the 55 million 360 thousand largest shareholder of the second largest shareholder (5.09% of the total share capital) has been auctioned at the judicial auction in July 23rd. It was awarded 132 million yuan by the Shenzhen Qianhai high search Cci Capital Ltd (hereinafter referred to as "Gao Shu Yi"), but it has not yet completed the transfer.

After the transfer, Gao Chao Yi will become the fifth largest shareholder of *ST, and the shares of the Wechsler family will drop to 22.85%, still far ahead of the 16.54% stake of Yu Ping and Weng yuan.

Gao Chao Yi CEO Chen Kang said that Gao can easily vote at the shareholders' meeting in September 11th. It depends on whether or not the stock transfer has been completed. The transfer is in normal progress. In addition, the specific support must be obtained first, and then the investor conference to decide.