China Solar executives arrested over fraud
China Solar Energy Holdings has released an announcement pursuant to the Rule 13.09(2)(a) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong and Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance.
The board of directors of the Company has been informed by the Stock Exchange that complaints have been filed with the Stock Exchange, which alleged that (i) the registration of the Changzhou
Subsidiary has been revoked by the local administration for industry and commerce and all the assets of Dali Subsidiary, together with the Changzhou Subsidiary have been frozen for the reason that the registered capital of the Dali Subsidiary has not been paid up in accordance with the relevant PRC laws. The company reports that Mr. Yeung Ngo, the chairman and executive director of the Company, Mr. Yang Yuchun, an executive director of the Company, and Mr. Hao Guojun, a non-executive director of the Company, have been detained by the PRC authority due to fraudulent acts in the PRC which involved the major assets of two subsidiaries of the Company.
Upon notification of the Allegations by the Stock Exchange, the Board has sought advice from its PRC legal advisers in order to ascertain the validity of the Allegations. Based on the investigation conducted by the PRC legal advisers of the Company, the Board would like to provide the following information to the shareholders of the Company in connection with the Allegations as follows:
1st Allegation
The Changzhou Subsidiary is a wholly foreign-owned enterprise established in the PRC on 14 March 2007 and has an initial registered capital of US$49,980,000 which shall be paid up on or before 13 March 2009. On 11 December 2007, the Changzhou Subsidiary increased its registered capital to US$99,980,000 and the increase in registered capital in the amount of US$50,000,000 shall be paid up on or before 23 June 2010. As at the date of this announcement, the paid-up capital of the Changzhou Subsidiary as shown in the record of the Changzhou Administration for Industry and Commerce is US$19,358,000.
As advised by the PRC legal advisers of the Company, given that the registered capital of the Changzhou Subsidiary has not been paid up in accordance with the PRC laws, each of the annual review of the Changzhou Subsidiary for the years 2010, 2011 and 2012 has not been passed by the Changzhou Administration for Industry and Commerce and there is a legal risk that a penalty be imposed and/or the foreign investment enterprise approval certificate and the business license of the Changzhou Subsidiary be cancelled or revoked. However, based on the investigation conducted by the PRC legal advisers of the Company and to the best knowledge, information and belief, after having made all reasonable enquiries by the Directors, the business registration of the Changzhou Subsidiary remains valid and has not been cancelled or revoked and the Changzhou Subsidiary has the corporate legal representative status as at the date of this announcement.
The Board further confirmed that the Changzhou Subsidiary is in the course of relocating its production plant and as such, the Changzhou Subsidiary is not in operation as at the date of this announcement. As advised by the PRC legal advisers, the relocation of production plant is not related to the business registration issue of the Changzhou Subsidiary.
2nd Allegation
The Dali Subsidiary is a wholly foreign-owned enterprise established in the PRC on 24 January 2008 and has a registered capital of US$49,460,000 which shall be paid up within 1 year from 24 January 2008. As at the date of this announcement, the paid-up capital of the Dali Subsidiary as shown in the record of the Dali Administration for Industry and Commerce is nil.
Based on the investigation conducted by the PRC legal advisers of the Company and to the best knowledge, information and belief, after having made all reasonable enquiries by the Directors, the assets of the Dali Subsidiary (the "Assets"), including but not limited to the landed property, factory buildings, facilities and vehicles, have been frozen and the original licenses and documents of the Dali Subsidiary (the "Documents"), including but not limited to the contracts, invoices, books and records, bank card, tax registration certificate, organization code certificate, business license, foreign investment enterprise approval certificate have been temporarily seized by the Public Security Bureau of Dali as at the date of this announcement. As confirmed by the PRC legal advisers of the Company, the reason for freezing the Assets and seizure of the Documents is due to an investigation by the Public Security Bureau of Dali of a suspected case of making false report of registered capital which Mr. Yeung and Mr. Yang were involved in (the "Investigation").
The Board further confirmed that the Dali Subsidiary has not yet formally commenced operation and it contributes no revenue to the Group up to the date of this announcement. Pending the outcome of the Investigation of the Case (as defined below), the Board is currently unable to confirm whether the freezing of the Assets and the seizure of the Documents of the Dali Subsidiary would have any material impact on the financial performance of the Group. The Directors are still in the process of assessing the impact of the Investigation on the financial performance of the Group and whether there exist any other possible impacts to the Group.
3rd Allegation
The Board confirms that the Company is not able to contact the Relevant Directors since around August 2013. Based on the investigation report issued by the PRC legal advisers of the Company, each of the Relevant Directors has been arrested and detained by the Public Security Bureau of Dali since 26 August 2013 for their involvement in a suspected case of making false report in relation to the registered capital.
As the Relevant Directors remain uncontactable, the Company is not able to ascertain the nature and status of the Investigation by the Public Security Bureau of Dali as at the date of this announcement. Further announcement(s) will be made by the Company as and when appropriate in compliance with the Listing Rules as the Case progresses further. SUSPENSION OF DIRECTORS'
Following the arrest of the Relevant Directors by the Public Security Bureau of Dali, the Board has resolved to suspend, with effect from 18 October 2013, the duties and functions of each of Mr. Yeung, Mr. Yang and Mr. Hao pending the outcome of the Investigation of the Case.
The Board now comprises 11 Directors, namely, Mr. Yeung Ngo, Mr. Yang Yuchun, Ms. Jin Yan, Mr. Sun Yanfeng, Mr. Guo Lijie, Mr. Hao Guojun, Mr. Li Jian, Mr. Yin Tat Man, Mr. Fan Chuan, Mr. Gu Yizhong and Mr. Zhang Jing. Among these 11 Directors, three Directors have been suspended from their duties.
The Board considers that the suspension of duties of the Relevant Directors would not affect the daily operation of the Group as the remaining three executive Directors and the senior management of the Company, who have sufficient knowledge and experience, are fully responsible for the daily operation of the Group.