Nanfang Shares (600250): Rarely Opposed By Insurance Fund

On the afternoon of June 14, the 2021 annual general meeting of shareholders of Nanfang (600250) was held in Qinhuai District, Nanjing. There were 12 shareholders and agents attending the meeting. A total of 8 motions were approved, and some of them were voted against.

According to the announcement, the voting result of the 7th "proposal on the renewal of the appointment of accounting firms" was deliberated by the general assembly, and 148.452112 shares were approved, accounting for 88.65%, and 1999.7503 million shares were opposed, accounting for 11.35%. Among them, 388201 shares were voted against by minority shareholders, and 18609302 shares were voted against by major shareholders.

By the end of March 2022, the insurance fund held 18609302 shares of Nanfang shares, accounting for 6.89% of the circulating share capital.

The insurance fund was established on August 30, 2005. It is funded by the State Council, and the Ministry of Finance appropriates 6.3 billion yuan of registered capital in a lump sum, and is under the centralized management of the CSRC. The main responsibilities include raising, managing and operating securities investor protection funds; Monitor the risks of securities companies and participate in the risk disposal of securities companies; Responsible for the operation and maintenance of the 12386 hotline of the CSRC. At present, the insurance fund has entered the top ten shareholders of three A-share listed companies. In addition to Nanfang shares, it also holds 1.155.67 billion yuan of SDIC capital (600061), accounting for 17.99% of shares, and 55.725.125 million yuan of Harbin Pharmaceutical Co., Ltd. (600664).

As a matter of fact, the insurance fund did not vote against NanFang's proposal on the renewal of accounting firms.

According to the proposal, Nanfang intends to continue to employ Daxin accounting firm (hereinafter referred to as "Daxin accounting firm") as the audit institution in 2022 to provide audit services for the financial report and internal control of 2022. As of 2021, the company has provided audit services for the company.

After the bill passed, it means that Daxin accounting firm will serve Nanfang for the 11th consecutive year. However, this continuous service life is not consistent with the rotation system of audit institutions to be implemented in state-owned enterprises.

At the beginning of April 2022, the Ministry of finance, together with SASAC and CSRC, studied and drafted the administrative measures for the selection and appointment of accounting firms by state-owned enterprises and listed companies (Draft for Soliciting Opinions), which put forward specific requirements for the selection and appointment of accountants by state-owned enterprises. According to Article 10 of the draft, the continuous employment of the same accounting firm by state-owned enterprises shall not exceed eight years in principle. At the end of the 8-year term, the state-owned enterprises may appropriately extend the employment term due to business needs, but the cumulative number of consecutive employment years shall not exceed 10 years.

The actual controller of Nanfang is the state owned assets supervision and Administration Commission of Nanjing city. Although the above provisions are still in the stage of soliciting opinions and the specific implementation time has not been specified, after the provisions are formally implemented, Nanfang shares must comply with this regulation and replace the audit institution.

In addition, according to the annual report of Nanfang Co., Ltd., the audit cost of financial report of Daxin accounting firm in 2021 is 1.2 million yuan, and that of internal control audit is 400000 yuan. As for the charging standard of 2022, the proposal does not specify it. Instead, the management is authorized to determine the audit fee according to the audit workload in 2022.

In addition, Daxin accounting firm also has the problem of credit record. In recent three years, Daxin accounting firm has been subject to administrative punishment once and administrative supervision measures 15 times. Among the employees, 2 people have been subject to administrative punishment and 27 people have been subject to supervision and management measures.