ST Fugangs 8-year false increase of 1.9 billion profits: top penalties for shareholding of nine major banks

category:Finance
 ST Fugangs 8-year false increase of 1.9 billion profits: top penalties for shareholding of nine major banks


At present, the top ten shareholders of ST Fugang, except the major shareholder of Northeast Special Steel Group Co., Ltd. (hereinafter referred to as Northeast Special Steel), the remaining nine shareholders are banks that entered during the bankruptcy reorganization last year.

ST Fugang was investigated by the SFC on March 21, 2018 for failing to disclose its annual report for 2017 and its first quarter report for 2018 within the legal time limit.

According to the investigation, ST Fugang made six false records in its annual report from 2010 to 2016 and the third quarter report of 2017 for eight consecutive years. By means of increasing inventories, reducing production costs, transferring part of the inventories into construction projects and capitalizing fixed assets, the total accumulated profits in the past eight years amounted to 1.902 billion yuan.

In the first three quarters of 2010-2016 and 2017, ST Fugang accumulated 1.989 billion yuan in inventory and 1.989 billion yuan in total cost of carrying over main business; from 2013 to 2014, the company accumulated 1.138 billion yuan in construction projects; from 2013 to 2015, the company accumulated 842 million yuan in fixed assets; from 2014 to 2016, the company accumulated 87 million yuan in depreciation of fixed assets. Yuan.

Forced debt-to-equity restructuring

ST Fugangs financial problems are not only exposed today. As early as the beginning of last year, the problem of fraud could not be covered up.

After five months of self-examination, the self-examination of ST Fugang was completed on June 26, 2018. On the same day, the company issued 29 announcements, including accounting error correction, retrospective adjustment instructions, 2017 annual report and so on. ST Fugang said that after self-examination, it was found that the companys internal control system had major defects, resulting in inventory, fixed assets, construction in progress and other distortions.

The company has adjusted its balance sheet, profit statement and other items before 2014 and from 2014 to 2016 respectively.

The auditing reports of insolvency, negative net profit for two consecutive years, negative net assets at the end of 2017, and unable to express opinions issued by accounting firms in 2017 were presented.

On November 21, 2018, the Fushun Intermediate Peoples Court decided to approve the reorganization plan of ST Fugang. According to the reorganization plan, capital accumulation fund will be converted into equity at the proportion of no more than 5.72 shares per 10 shares. At the same time, the controlling shareholder of Northeast Special Steel, ST Fugang, does not exceed 900 million yuan to supplement the companys capital accumulation fund.

On December 27 of the same year, the reorganization plan was completed. In the end, the total equity of the company increased from 1.3 billion shares to 1972 million shares. In addition, the reference price of ST Fugangs deweighting under the new total equity is 2.38 yuan per share.

After the reorganization, the top ten shareholders of ST Fugang changed blood greatly, except the major shareholder of Northeast Special Steel, the remaining nine seats are all banks.

The announcement shows that the Fushun Branch of the Bank of China has received 123 million shares of additional shares to offset ST Fugangs financial debts in the bank, and its share-holding ratio has increased from 0% to 6.23%, making it the second largest shareholder. As of the first quarter of 2019, among the top ten shareholders of ST Fugang, Dalian Branch of Bohai Bank, Liaoning Branch of Construction Bank, Dalian Branch of Minsheng Bank, Shenyang Branch of Huaxia Bank and Liaoning Branch of Industrial and Commercial Bank all hold more than 2%; Liaoning Bank, Fushun Bank and Industrial Bank all hold about 1.5%. Among them, Shenyang Branch of Societe Generale Bank ranked among the top 10 shareholders for the first time in the first quarter of 2019.

First quarter net profit turned positive

However, lawyer Hu Peng, a partner of Beijing Yingke (Shanghai) Law Firm, told First Financial Journalist that the possibility of delisting was not high. The Shanghai Stock Exchange for major illegal delisting involving six aspects, ST Fugang has not yet involved, and in the retrospective adjustment of the data has not touched. He analyzed that ST Fugang had withdrawn its delisting risk warning in April this year. If this involves major illegal delisting, the company shall disclose the notice of termination of listing. For ST Fugang, the greater burden may come from investorsclaims. After all, after eight years of financial fraud, the number of investors damaged is large. First financial reporter learned that some securities litigation lawyers have acted on behalf of some investors. On July 11, ST Fugang closed at 2.88 yuan per share, down 3.03%. Source: First Financial Daily Author: Wei Zhongyuan Responsible Editor: Zhong Qiming_NF5619

However, lawyer Hu Peng, a partner of Beijing Yingke (Shanghai) Law Firm, told First Financial Journalist that the possibility of delisting was not high. The Shanghai Stock Exchange for major illegal delisting involving six aspects, ST Fugang has not yet involved, and in the retrospective adjustment of the data has not touched. He analyzed that ST Fugang had withdrawn its delisting risk warning in April this year. If this involves major illegal delisting, the company shall disclose the notice of termination of listing.

For ST Fugang, the greater burden may come from investorsclaims. After all, after eight years of financial fraud, the number of investors damaged is large. First financial reporter learned that some securities litigation lawyers have acted on behalf of some investors.