*ST Gaosheng (000971): When Will The Internal Combat Take Place?

As a member of big data and cloud computing, *ST has not been promoted by the popular concept. Instead, it has struggled to make a living under the influence of monopoly. The fundamental reason is that the external cause is just a representation, and the calamity arises from the wall.

Nineteen related transactions are not disclosed as required

In the evening of October 17, 2019, Gao Sheng Cmi Holdings Ltd (*ST Gaosheng and Gaosheng Holdings) announcement received the "administrative penalty and market entry notice" issued by the Hubei Regulatory Commission of the SFC. The company was found to have concealed 19 related transactions. It has been identified that the 5 companies, including Chinese entertainment, Shenzhou 100 opera, cultural Silicon Valley, Hua butterfly art, and brilliant leader, are all the companies controlled by Wei Junkang, the father of the Gaosheng holding real controller, Wei Zhenyu, and the related party of Gaosheng holding company.

First of all, Gaosheng holding as a common borrower borrows for these 5 companies, and there are 7 acts of forming related guarantee in essence. According to the above 7 common loan agreements and the performance of the agreement, the borrowers and users of the loan are not Gaosheng holdings, but the related party of Gaosheng holdings. Gaosheng holdings mainly undertake the repayment obligations under certain conditions in the above-mentioned common loan matters, and constitutes a guarantee legal relationship in essence. Secondly, Gaosheng holdings directly provide guarantees for the 5 companies, which constitute a total of 11 related transactions. In addition, Gaosheng holdings lending funds to related parties use, constitute 1 related transactions.

In fact, as early as September 2018, *ST was promoted to be investigated by the SFC on suspicion of information disclosure. In July 2018, *ST Gaosheng was exposed by Wei Zhenyu, the actual controller of the company, for violation of related party guarantee. Since then, the Shenzhen Stock Exchange issued a number of letters of concern to Gaosheng holdings. *ST has revealed a number of issues such as illegal guarantee, illegal occupation of company funds and internal control.

*ST Gaosheng 2018 financial statements were issued with no opinion of the audit report, accounting firms said, "its formation can not express the basis of opinion" is mainly because Wei Zhenyu and Li Yao, without the approval of shareholders' meeting or the board of directors, authorized the use of the company's official seal several times, in the name of the company as a common borrower or guarantor to guarantee the financing of the controlling shareholder and the related party and the actual controller's related party. 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 30, 2019, the company has been warned of the risk of delisting, which is changed from "ST high rise" to "*ST rise" for short.

The Hubei Securities Regulatory Commission issued "advance notice" is also expected, based on violations, the securities regulatory bureau of Hubei intends to give Gao Sheng holdings a warning and impose a fine of 600 thousand yuan. Wei Zhenyu has also been fined 900 thousand yuan and has taken 5 years' ban on securities market. According to the relevant judicial interpretations, if investors can buy *ST rise before September 28, 2018 and sell or continue to hold after September 28, 2018, and have caused certain losses (whether or not to unbind), they can initiate a claim. You simply send the name, telephone number and transaction record (recommended Excel file) to the mailbox of weiquan@hongzhoukan.com, and participate in the claim collection activities organized by the "red weekly" and "civil rights protection" column in the stock market, so as to safeguard their legitimate rights and interests. The vast majority of investors do not have to pay any lawyer fees before obtaining compensation.

Control competition is changing?

The contradiction between *ST's rising shareholders began last year. It is reported that since the weir family's debt quagmire in July last year, the amount of illegal external guarantees has exceeded 2 billion. Many of the companies under the Weill family have entered bankruptcy reorganization procedures, and *ST holding shares have been frozen by law, and some have been auctioned off. In January of this year, 9 directors of Yu Ping and Weng yuan jointly proposed the removal of directors of Wei Zhenyu, Li Yao, Zhang Yiwen and Sun Peng (Wei Zhenyu's cousin).

It is reported that Ping Ping and Weng yuan jointly hold more than 10% of *ST shares (up to 17%). In July this year, Yu Ping and Weng yuan sent a letter to *ST's board of directors, calling for a temporary shareholders' meeting. They proposed to recall the 3 persons in charge of the board of directors, namely, Wei Zhenyu, Li Yao and Zhang Yiwen, and nominate 3 additional directors. Li Yao, chairman of the Wei family, refused to convene the board of directors on the ground of failing to submit proof documents as required. Yu Ping and Weng yuan bypassed the board of directors, and then proposed to the *ST rose board of supervisors, calling for a temporary shareholders' meeting. Finally, all 3 members of the board of supervisors voted in favour, and agreed to convene the general meeting of shareholders in September 11th. *ST's rising shareholder struggle was temporarily appeased.

However, after receiving some of the shareholders' opinions, the board of supervisors held a meeting before the shareholders' meeting in September 8th, and unanimously rejected the motion to remove the 3 directors from the Wei family and invited the Beijing Zhen Bang law firm to issue a legal opinion on the meeting, accusing Yu Ping and Weng yuan of violating the articles of association.

For the two meetings of the board of supervisors before and after, the Beijing Zhen Bang law firm has issued reasonable opinions. The contents of the two meeting of the board of supervisors are just the opposite. This move has become the focus of the Shenzhen Stock Exchange, that is, does the *ST high rise board of supervisors have the right to revoke shareholder motions? If there is a right, why did it not be revoked for the first time, is it diligent and conscientious? If there is no right, the second cancellation of shareholder motion is obviously unreasonable.

No matter what the trick is, Wei Zhenyu's board of directors has been unable to keep up with the market being banned. We will wait and see whether there will be any changes in the control of shareholders' control of the board of directors.