Zhejiang Furun (600070): Major Asset Restructuring Parties Publicly Condemned

Recently, the Shanghai Stock Exchange denounced Jiang Yougui and Fu Haipeng, the counterparties of major asset restructuring transaction of Zhejiang Furun Digital Technology Co., Ltd.

According to the disciplinary decision of the Shanghai Stock Exchange, on December 2, 2016, Zhejiang Furun Digital Technology Co., Ltd. disclosed the issuance of shares and the payment of cash to purchase assets and raise matching funds and related party transactions. The report said that the company intends to issue shares and pay cash to Jiang Yougui and Fu Haipeng and other 18 shareholders purchased 100% equity of Hangzhou taiyizhishang Technology Co., Ltd. (taiyizhishang) held by them. The estimated share payment amount is 998.448 million yuan, the expected number of shares to be issued is 133126400 shares, and the expected cash payment amount is 201.552 million yuan. Among them, Jiang Yougui and Fu Haipeng hold 24.59% and 8.89% of the shares of taiyizhishang respectively.

The counterparties promised that the net profits of taiyizhishang after deduction of non-profit in 2016, 2017 and 2018 were 55 million yuan, 85 million yuan and 122 million yuan respectively. According to the relevant annual reports disclosed by the company and the assurance report on the completion of performance commitments, from 2016 to 2018, the performance commitment completion rates of taiyizhishang were 111.88%, 101.97% and 108.16% respectively, and the cumulative performance commitment completion rate was 106.93%.

On November 27, 2018, the company disclosed that Jiang Yougui and Fu Haipeng voluntarily added the performance commitment of taiyizhishang in 2019 and 2020. It is estimated that the net profit after deduction of non-profit in 2019 and 2020 will not be less than 159 million yuan and 207 million yuan respectively. If the net profit realized by taiyizhishang in 2019 and 2020 is lower than the committed net profit, Jiang Yougui and Fu Haipeng will make up the difference between the actual net profit and the committed net profit by cash or stock.

On April 28, 2020, the company disclosed the 2019 annual report, which showed that the net profit after deducting non-profit of taiyizhishang in 2019 was RMB 75.3836 million, and the performance commitment completion rate in 2019 was 47.41%. On April 27, 2021, the company disclosed the annual report for 2020, which showed that taiyizhishang achieved a net profit of 25.1206 million yuan after deducting non-profit in 2020, and the performance commitment completion rate in 2020 was 12.14%. Accordingly, taiyizhishang will achieve a net profit of 100.5042 million yuan after deducting non-profit in 2019 and 2020, and the cumulative performance commitment completion rate is 27.46%.

On November 14, 2020, the board of directors of the company deliberated and approved the supplementary agreement of the letter of commitment on voluntary additional performance commitment signed with Jiang Yougui and Fu Haipeng, and agreed that Jiang Yougui and Fu Haipeng should pay the company performance compensation of RMB 83.6164 million in cash before December 31, 2021. The compensation for the above matters has not been disclosed by Haipeng on December 31, 2021, but the compensation period for the above matters has expired on May 31, 2029. On March 18, 2022, the company disclosed that it had received 1 million yuan of performance compensation in 2019 paid by Jiang Yougui and Fu Haipeng.

Up to now, Jiang Yougui and Fu Haipeng, the performance commitment party and the compensation responsible persons, have not fulfilled the remaining performance compensation obligations.

According to the disciplinary decision, Jiang Yougui and Fu Haipeng, the counterparties of the transaction, as the performance commitment party and compensation responsible person, failed to fulfill the industry performance compensation obligation when the underlying asset performance did not meet the standard and there was a big difference with the promised performance. The above-mentioned behaviors violate articles 2.23 and 11.12.1 of the Listing Rules of Shanghai Stock Exchange (revised in 2020) (hereinafter referred to as the Listing Rules).

In accordance with Article 16.2 of the stock listing rules, the measures for the implementation of disciplinary actions and regulatory measures of the Shanghai Stock Exchange, and the application guidelines of the self regulatory rules of listed companies of Shanghai Stock Exchange No.2 - implementation standards of disciplinary actions, the Shanghai Stock Exchange has imposed a negative impact on Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui, Jiang Yougui Fu Haipeng denounced it publicly.