Behind The Trend Of "Large Shareholder Occupation" In A Share Market: Why Does "Desperate Risk" Happen Frequently?

It is not accidental that the large shareholders violate the rules and regulations and are mentioned by the regulatory authorities.

"Large shareholders and actual controllers' capital occupation and illegal guarantee seriously damage the interests of listed companies and small and medium-sized shareholders." On the evening of August 7, China Securities Regulatory Commission (CSRC) specially pointed out that the case handling situation in the first half of 2020 was reported.

The 21st century economic reporter has been tracking and understanding the illegal occupation of large shareholders for a long time.

In 2003, China Securities Regulatory Commission (CSRC) issued a notice to regulate the capital flow between listed companies and related parties and the external guarantee of listed companies. In 2006, the CSRC, together with the Ministry of public security, the people's Bank of China and SASAC, made clear requirements on clearing up the funds occupied by major shareholders. However, from the investigation cases in recent years, the problem of capital occupation is still difficult to stop, and it is still a long way to go to curb the occupation.

Why is it difficult to stop illegal occupation by large shareholders and actual controllers? How can this problem be solved?

Our reporter's investigation found that this problem can be roughly divided into the following elements: large shareholders need to use money, difficulties in obtaining funds from other channels, successful "withdrawal" from listed companies, and choice to bear the risk of illegal occupation.

It is obviously a dangerous way for large shareholders to regard listed companies as "cash machines".

Investigation on violations of "fancy" of major shareholders

According to the data disclosed by the CSRC on the evening of August 7, 165 new cases of various types were added from January to June this year, 154 cases were settled, 59 cases of suspected securities crimes and clues were transferred to the public security organs, and 98 administrative punishment decisions were made, with a total amount of 3.839 billion yuan. It involves financial fraud, capital occupation by major shareholders and actual controllers, illegal guarantee, failure of intermediary agencies to practise their duties diligently, insider trading, market manipulation, etc.

Among them, in the first half of the year, China Securities Regulatory Commission (CSRC) filed and investigated 24 cases of capital occupation and illegal guarantee of major shareholders and actual controllers who failed to disclose as required.

For example, the actual controller of fukong interaction (600634) and Yufu shares (002427) borrowed money in the name of the listed company, borrowed money from the bank deposit of the listed company as pledge, and transferred the funds to the account controlled by the major shareholders.

According to the data sorted out by reporters of the 21st century economic report, recently, many listed companies, such as St Jinhua, St shenglai, * ST Toyo and Tianxiang environment, have exposed illegal occupation by major shareholders in various forms, including direct transfer, indirect fund borrowing and illegal occupation caused by illegal guarantee.

Taking st Jinhua as an example, the company disclosed on July 31 that it had received the advance notice of administrative punishment issued by Shaanxi regulatory bureau of China Securities Regulatory Commission.

In 2019, Jinhua investment signed the loan agreement and financial consultant contract with the listed company through non related parties, and other related parties Xi'an sangshuo and Xi'an Honghui borrowed 27 loans from the listed companies by signing the loan agreement with Jinhua shares and its subsidiaries, 7.77 million yuan (to be returned in batches before June 29, 2020), accounting for 15.68% of the net assets of Jinhua shares by the end of 2018.

However, St Jinhua did not disclose the behavior of the above-mentioned related parties occupying the capital contracts of the listed company in time.

On June 30, * ST Toyo disclosed the announcement on receiving the return of non operating funds of listed companies from controlling shareholders. According to statistical verification, as of June 28, 2020, the company's controlling shareholder Shandong Oriental Ocean Group Co., Ltd. had a capital balance of 1.37 billion yuan.

The announcement revealed an important signal that the controlling shareholder of the company failed to sell the assets as scheduled and could not repay the loan as scheduled. The creditor fulfilled the procedures and executed * ST Toyo 824 million yuan. Therefore, the controlling shareholder occupied the capital of the listed company, and the guarantee of * ST Toyo did not perform the decision review procedure.

It can be seen that the capital chain of major shareholders of * ST Toyo has been extremely tight.

"Desperate" under the lack of money?

Lack of money is the primary cause of illegal occupation of large shareholders.

"In fact, in the middle of a few years, the problem of large shareholders' capital occupation has been very rare, and only in these years has it revived." A senior investment banker pointed out to reporters.

According to his observation, after 2015, with the increase of deleveraging, the extensive development mode relying on credit expansion failed to work, some conventional financing channels were gradually tightened, and major shareholders took the idea of listed companies.

A senior investment banker also admitted that according to his observation, the number of illegal occupation by major shareholders has increased significantly since 2018.

One background is that in the second half of 2018, the stampede decline caused by the stock pledge crisis of major shareholders and a series of control changes. As a result, there is no lack of large shareholders "taking risks" and using listed companies as "cash dispensers". In the absence of internal control, it is difficult for the company to get effective control.

"The main reason why large shareholders illegally occupy the funds of listed companies is that large shareholders are short of money, and there is no matching internal control system within listed companies to restrict large shareholders, so the system is useless." Professor Pan Helin, executive director of the Digital Economy Research Institute of Central South University of Finance and law, was interviewed.

"The entire management of many companies is controlled by major shareholders and actual controllers. The major shareholders can control the capital management of the whole listed company and make profits by using the funds of the listed company, so there is no effective restriction." A senior partner of the law firm told reporters.

From the internal point of view, it is difficult to form an effective restriction, and from the external point of view, the relevant laws can not effectively deter the relevant responsible persons.

Taking st Guanfu as an example, the company's reply to the concern letter of Shenzhen Stock Exchange on October 12, 2018 showed that the controlling shareholders and actual controllers of St Guanfu, including Lin Fuchun, Lin Wenhong, Lin Wenzhi and Lin Wenchang (collectively referred to as "St Guanfu's controlling shareholders") issued commercial acceptance bills in the name of St Guanfu or ST Guanfu's holding subsidiaries and discounted them As of the disclosure date of the announcement, the total amount of violations was 1.985 billion yuan, accounting for 37.16% of the net assets of St Guanfu in 2017.

Compared with the huge amount of "withdrawal" of 2 billion yuan, the administrative punishment of St Guanfu is only public condemnation.

St Guanfu announced on June 25, 2019 that the Shenzhen stock exchange would publicly reprimand st Guanfu for its non operating capital occupation of nearly 2 billion yuan and illegal external guarantee, and publicly recognized that Lin Wenzhi, then vice chairman and general manager, and Lin Wenchang, then chairman of the board, were not suitable to serve as directors, supervisors and senior managers of listed companies within five years.

What is the solution?

Listed companies are public companies, which belong to all shareholders including small and medium-sized shareholders. Capital occupation and illegal guarantee directly and indirectly empty the listed companies and seriously damage the interests of listed companies and small and medium-sized shareholders, which is a stubborn disease in the capital market.

Where is the solution?

"Capital occupation and illegal guarantee essentially reflect that the will of the major shareholders and actual controllers has replaced the will of the listed companies, and the listed companies have become the vassals of the major shareholders and actual controllers for their own personal interests. For the sake of the listed company, the directors are not diligent in performing their duties A senior market person thinks.

"To eradicate illegal occupation, we should rely on effective corporate governance internally, rely on regulatory law enforcement and criminal punishment externally, and take civil compensation as the starting point to investigate the fiduciary obligations of major shareholders and directors, supervisors and senior executives to shareholders, especially small and medium shareholders." The person continued.

Pan Helin pointed out to reporters that the core way to stop illegal occupation is to improve the internal control of listed companies and let all parties supervise the implementation.

"For example, the performance of independent directors, the financial approval system, and the annual audit of certified public accountants are all supervision forces. In terms of supervision, if it is found that the CPA does not have the necessary internal control evaluation, the independent directors do not express their opinions in time, and the CFO of the company's top management does not go through the necessary process, the funds are allocated. The relevant shareholders should not be held responsible. Of course, it is also very important to maintain strict punishment for major shareholders who violate the rules. Only by binding the hands and feet of large shareholders with the system can we put an end to the illegal occupation of funds, protect the small and medium shareholders with the system, and achieve long-term stability. "

Large shareholders can "withdraw" from the listed companies smoothly, and the restriction of directors, supervisors and senior executives can not be ignored. In fact, the company law has already made clear provisions on this.

"The securities regulatory authorities activate the directors' trust responsibility clearly stipulated in the company law through administrative penalties, which has an irreplaceable role in preventing shareholders' occupation." Yin Zhongyu, head of the securities investment banking business of the Federal Reserve, told reporters of the 21st century economic report.

In addition, a senior investment bank personage admitted that severe punishment should be maintained for major shareholders who violate the rules. The exchange should also perform the duty of reporting to the judicial authorities and transfer evidence to the public security organs in a timely manner.

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