Two fines, two resignations: ST Derun and ST Bailing both receive administrative penalty decisions

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Original Title: Two Fines, Two Resignations

On the evening of March 27, ST Derun (Rights Protection) and ST Bailing (Rights Protection) both announced that the company and related parties received the “Administrative Penalty Decision.”

Image Source: Company Announcement

ST Derun was fined over 20 million yuan for fictitious collections and underreporting credit impairment losses from 2020 to 2022, leading to false records in multiple annual reports and non-public issuance documents. The actual controller Qiu Jianmin was banned from the securities market for 5 years.

ST Bailing was fined over 24 million yuan for irregular accounting of sales expenses from 2019 to 2023, resulting in distorted profit data in multiple annual reports. The then-chairman Jiang Wei was banned from the securities market for 10 years.

ST Derun: Fictitious Collections, Underreporting Credit Impairment Losses

ST Derun (formerly “Derun Electronics”) announced that on March 27, the company and related parties received the “Administrative Penalty Decision” issued by the Shenzhen Securities Regulatory Bureau.

Image Source: Company Announcement

The “Administrative Penalty Decision” shows that from 2020 to 2021, due to operational difficulties faced by Derun Electronics’ main customers, they were unable to repay their debts, leading to cash flow strain for the company. Qiu Jianmin, the actual controller, then-chairman, and president, provided funding support to Derun Electronics’ customers, subsidiaries, and equipment suppliers through personal funds and external loans for the repayment of historical debts owed to Derun Electronics.

Qiu Jianmin did not report the actual sources of these funds to Derun Electronics, resulting in fictitious collections of approximately 395 million yuan in 2020 and 113 million yuan in 2021, and underreporting credit impairment losses of 371 million yuan and 66.39 million yuan; underreporting capital reserves of 321 million yuan and 434 million yuan.

In June 2022, Qiu Jianmin coordinated with Derun Electronics’ subsidiary to provide funds to its joint venture company in the form of prepaid goods, to repay financial aid funds due to Derun Electronics, leading to fictitious collections of 26.83 million yuan in the first half of 2022 and underreporting credit impairment losses of 5.061 million yuan.

These actions resulted in false records in the 2020 annual report, 2021 annual report, and 2022 semi-annual report of Derun Electronics, violating relevant provisions of the Securities Law.

At the same time, Qiu Jianmin, as the actual controller of Derun Electronics, concealed from the company the provision of repayment funds to its customers, subsidiaries, and equipment suppliers, and coordinated with Derun Electronics’ subsidiary to provide repayment funds to the joint venture, resulting in illegal information disclosure by Derun Electronics, which also constitutes an illegal act.

Image Source: Company Announcement

Accordingly, the Shenzhen Securities Regulatory Bureau decided to warn Shenzhen Derun Electronics Co., Ltd. and impose a fine of 7 million yuan; to warn Qiu Jianmin and impose a fine of 12 million yuan (of which 4 million yuan is for direct responsibility as a supervisor, and 8 million yuan is for being the actual controller), and to impose a 5-year ban from the securities market.

At the same time, a warning was issued to Qiu Yang, president and director of Derun Electronics, with a fine of 2 million yuan; a warning was issued to Rao Qi, the then-financial director of Derun Electronics, with a fine of 1.5 million yuan.

It was noted that Qiu Jianmin resigned as chairman of the company in February 2023 due to reaching the statutory retirement age. ST Derun announced on the evening of March 27 that Qiu Jianmin applied to resign from his positions as director and member of the Strategy and ESG Committee. After resigning, Qiu Jianmin no longer holds any position in the listed company and currently serves as the chairman/director of some subordinate subsidiaries.

ST Bailing: Four Years of False Reporting in Annual Reports

On March 27, ST Bailing (formerly “Guizhou Bailing”) and related parties also received the “Administrative Penalty Decision” issued by the Guizhou Securities Regulatory Bureau. ST Bailing also announced that its chairman resigned on the same evening.

Image Source: Company Announcement

The “Administrative Penalty Decision” shows that the company did not use the accrual basis for accounting, and did not recognize sales expenses according to the matching principle of revenue and costs, leading to underreporting sales expenses of 350 million yuan in 2019 and overreporting profit by 350 million yuan, accounting for 95.73% of the reported total profit for the period (absolute value); in 2020 and 2021, sales expenses were underreported and profits overreported by 241 million yuan and 63.7916 million yuan, accounting for 115.35% and 45.04% of the total profit respectively. In 2023, sales expenses were overreported and profit underreported by 459 million yuan, accounting for 93.17% of the reported total profit for the period.

These actions led to false reporting in the annual reports disclosed for 2019, 2020, 2021, and 2023.

Image Source: Company Announcement

Accordingly, the Guizhou Securities Regulatory Bureau ordered ST Bailing to make corrections, issued a warning, and imposed a fine of 10 million yuan; a warning was issued to Jiang Wei, the then-chairman, with a fine of 5 million yuan and a 10-year ban from the securities market.

At the same time, a warning was issued to Niu Min, then-director, general manager, and board secretary, with a fine of 3.5 million yuan; a warning was issued to Jiang Yong, then-director and deputy general manager, with a fine of 2 million yuan; a warning was issued to Feng Jixian, then-deputy general manager, with a fine of 1.5 million yuan; a warning was issued to Li Hongxing, then-financial director, with a fine of 800,000 yuan; a warning was issued to Yuan Yuanzhen, then-executive deputy general manager, with a fine of 600,000 yuan; warnings were issued to independent directors Zhang Hongwu, Yang Ming, and Hu Jian, each with a fine of 500,000 yuan.

ST Bailing announced on the same evening that the company received a written resignation report from chairman Jiang Wei on March 26, in which he applied to resign from his positions of chairman, director, acting secretary of the board, convener of the strategy committee, member of the nomination committee, compensation and assessment committee, and statutory representative for personal reasons. According to relevant regulations, Jiang Wei’s resignation report takes effect from the date it is delivered to the board of directors. After resigning, Jiang Wei no longer holds any position in the company.

Author: Zhang Wenzhi

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