Subsidiary’s hundreds of millions in funds mysteriously disappear, and Xilinmen’s corporate governance faces scrutiny

Why did AI · The actual controller Chen Ayu be sued to court by Xilinmen?

China Economic Reporter Guo Yangchen, Shi Yingjing Shanghai report

Claimed as “China’s No. 1 Mattress Stock” by the veteran furniture company—Xilinmen Health Sleep Technology Co., Ltd. (hereinafter referred to as “Xilinmen”, 603008.SH) is deeply involved in a wave of illegal fund transfers.

According to Xilinmen’s announcement, its controlling subsidiary Xitu Technology Co., Ltd. (hereinafter referred to as “Xitu Technology”) had 100 million yuan of funds illegally transferred by internal personnel abusing their positions. In response, Xilinmen urgently froze related accounts totaling 900 million yuan, with the case and frozen funds amounting to about 1 billion yuan, accounting for 26.54% of the company’s most recent audited net assets and 42.69% of cash funds.

How will the fund transfer issue of Xitu Technology be resolved? China Business Journal reporters contacted Xilinmen and sent interview requests. On March 31, a staff member from Xilinmen’s securities department told reporters: “Currently, the public security authorities are conducting an investigation internally at Xilinmen. The case of Xitu Technology has not yet had further clear information. If there is any progress, we will release an announcement immediately.”

On the evening of April 1, Xilinmen issued multiple announcements and disclosed that the China Securities Regulatory Commission (CSRC) had initiated investigations into the company and its actual controller Chen Ayu; the board of directors approved the lawsuit with a 6:0 vote, seeking to recover nearly 478 million yuan from the controlling shareholder, and filed a lawsuit against the controlling shareholder and Chen Ayu. Meanwhile, all of Chen Ayu’s shares have been fully frozen.

The shockwave caused by a bizarre fund transfer incident is rapidly spilling over, and the corporate governance approach of Xilinmen is also under deep scrutiny.

Involved and frozen funds amounting to about 1 billion yuan

The announcement shows that recently, Xilinmen discovered that funds in the bank accounts of Xitu Technology had been illegally transferred, with a total transfer of 100 million yuan. Relevant personnel are suspected of abusing their positions to illegally embezzle company funds. To further prevent financial security risks and safeguard the company’s funds, Xilinmen applied for case filing and investigation with the public security authorities on March 26.

The reporter learned that Xilinmen has taken protective freezing measures on potentially involved bank accounts, which are under the names of Hangzhou Xiyue Furniture Sales Co., Ltd. and Shaoxing Xinxi Furniture Sales Co., Ltd., with a total frozen amount of about 900 million yuan.

Xilinmen explained that the freezing of these bank accounts was a proactive protective measure to safeguard funds, and there was no third-party freezing involved. This matter may temporarily impact the normal use of funds by Xitu Technology, but considering the company’s cash flow situation comprehensively, it will not cause significant adverse effects on overall production and operations for the time being. “The company is currently fully cooperating with the public security authorities to verify and investigate the relevant matters. Under the premise of ensuring account fund safety, we will promote the unfreezing of the accounts and actively work to recover the illegally transferred funds.”

Relevant data shows that the core entity involved in the illegal fund embezzlement, Xitu Technology, was established in January 2021 as a wholly owned subsidiary of Xilinmen, with a registered capital of 50 million yuan, located in Xiaoshan District, Hangzhou, Zhejiang Province.

Xitu Technology is a core strategic platform for Xilinmen’s layout in hotel engineering channels, and the only development and operation entity for this channel. Public information indicates that Xilinmen’s hotel engineering channel has entered brands such as InterContinental Hotels (IHG.N), Marriott International (MAR.O), Jinjiang Hotels (600754.SH), Huazhu (HTHT.O), BTG Hotels (600258.SH), Dongcheng Group, Shangmei, Atour (ATAT.O), Kaiyuan Hotel Group, and Juntin Hotel Group-controlled Junlan Resorts, with over 3,000 partner hotels, becoming an important growth point for the company.

However, business registration information for 2024 shows that Xitu Technology has only 8 employees. Yet, its books show it holds over 1.97B yuan in cash, accounting for nearly 20% of all subsidiaries’ total cash funds. Xilinmen’s semi-annual report for 2025 shows that the consolidated cash funds amount to 1.44B yuan, with the parent company holding 5.62B yuan, and all subsidiaries holding about 530 million yuan in cash.

In response, the above-mentioned staff from Xilinmen’s securities department said: “These (situations) are still under further investigation. We currently have no additional information.”

It is understood that after the illegal transfer of funds occurred, Xilinmen quickly carried out a self-inspection of fund security, strengthened its fund safety control system, established communication channels with relevant parties, and is actively negotiating the recovery of the transferred funds. The company will cooperate fully with the public security authorities’ investigation, work to recover the transferred funds as soon as possible, eliminate security risks in Xilinmen’s accounts, and ensure the safety of company assets.

Xilinmen stated that internally, it will pursue personnel accountability and internal control rectification, strengthen the legal and regulatory education of all directors, senior managers, and key personnel, improve operational compliance awareness, enhance corporate governance and internal control management capabilities, and reinforce the construction and enforcement of internal control systems.

Legal dispute with the founder

Relevant information shows that Chen Ayu was born in April 1962 in Shaoxing City, Zhejiang Province. In 1984, at age 22, he started a small furniture workshop in Shaoxing with 1,000 yuan of capital. At that time, domestic furniture mainly consisted of hardboard beds and straw beds, and “spring mattresses” (spring mattresses) had just entered China. He judged that “spring mattresses” would be a major trend in the future, gradually shifting into the mattress field. In 1988, Chen Ayu officially registered the “Xilinmen” trademark, meaning “happiness arrives at the door, good sleep accompanies.”

In the 1990s, Xilinmen gradually developed and expanded, beginning to operate as a company. In 2012, Xilinmen became the first A-share listed company in China’s mattress industry.

It is understood that Xilinmen exhibits typical family-controlled and concentrated equity features. Founder Chen Ayu is the actual controller of the company, with his children Chen Yicheng and Chen Pingqi as concerted actors. They control the company through direct holdings and via two major holding platforms: Zhejiang Huayi Intelligent Manufacturing Co., Ltd. (hereinafter “Huayi Intelligent Manufacturing”) and Shaoxing Yuecheng Huahan Equity Investment Partnership (Limited Partnership, hereinafter “Huahan Investment”), with a combined shareholding ratio exceeding 35%. Among them, Huayi Intelligent Manufacturing is also a shareholder of Xilinmen.

After more than ten years listed, Xilinmen ultimately faced a legal dispute with Chen Ayu. On March 31, 2026, Xilinmen received a “Notice of Acceptance of Case” from the People’s Court of Yuecheng District, Shaoxing City. Xilinmen and its two wholly owned subsidiaries sued Chen Ayu, Huayi Intelligent Manufacturing, and Huahan Investment for damages caused by breach of company interests.

The company also detailed the facts in its announcement. In 2026, Xilinmen needed to take out bank loans for business operations. Chen Ayu and related parties used the company’s loan transfer business model, which has so far resulted in an outstanding amount of 72 million yuan owed to Xilinmen that has not been repaid.

Additionally, in 2025–2026, Xilinmen engaged in factoring financing. For payments already made to suppliers, Chen Ayu’s side used factoring financing in the name of suppliers to banks, with the funds ultimately flowing to Chen Ayu and designated accounts. Preliminary information indicates that Chen Ayu’s side obtained about 406 million yuan in funds. For the payments that suppliers have applied for bank financing and that the defendants have actually received, Xilinmen is responsible for paying.

It is reported that due to some accounts payable maturing, Xilinmen and its wholly owned subsidiaries have actually assumed payment obligations to banks totaling about 118 million yuan, plus the 72 million yuan of unpaid loans, resulting in a total non-operational fund occupation of 190 million yuan by the controlling shareholder and related parties.

Xilinmen stated that Chen Ayu, Huayi Intelligent Manufacturing, and Huahan Investment’s behavior of obtaining funds has seriously damaged the company’s interests, prompting the lawsuit. “The company will continue to maintain communication with the controlling shareholder and its concerted actors, urging them to resolve the fund occupation issues through cash repayment, asset swaps, stock reductions, etc., and actively promote the progress of this litigation.”

Notably, on the evening of April 1, Xilinmen announced that due to suspected information disclosure violations, both Xilinmen and Chen Ayu received a “Notice of Filing” from the CSRC.

Renaming and transformation to seek performance breakthrough

As a traditional furniture manufacturer, Xilinmen’s recent performance shows a trend of “revenue growth without profit increase.” Financial reports indicate that from 2020 to 2024, Xilinmen’s revenue increased from 8.73B yuan to 2.18B yuan, with net profit attributable to the parent fluctuating significantly, at 313 million, 559 million, 238 million, 429 million, and 322 million yuan respectively.

Latest financial data shows that in the third quarter of 2025, Xilinmen achieved operating revenue of 6.2B yuan, a year-on-year increase of 7.78%; net profit was 133 million yuan, down 6.1% year-on-year. In the first three quarters of 2025, operating revenue was 6.196 billion yuan, up 3.68%; net profit was 399 million yuan, up 6.45%.

Against this backdrop, Xilinmen is actively embracing AI, transforming towards intelligence and technology. In January 2026, Xilinmen decided to change its Chinese name from “Xilinmen Furniture Co., Ltd.” to “Xilinmen Health Sleep Technology Co., Ltd.”

“The name change mainly reflects Xilinmen’s overall strategic transformation. Currently, we want to develop more in the direction of intelligence,” said a staff member from Xilinmen’s securities department. “More of our product R&D is moving towards tech-based sleep solutions. The name change aligns with the company’s future development plan and the overall industry trend.”

The reporter learned that Xilinmen is firmly pushing its strategic transformation from a “traditional furniture manufacturer” to a “technology-based sleep solution provider.”

The reason, according to Xilinmen, is that on one hand, consumer acceptance of smart functions is increasing, and AI smart mattresses with active intervention and adaptive regulation are the future. But currently, this is still in the technological and market education stage. On the other hand, AI mattresses are not just “plug-in” beds; they involve a full chain of hardware, software, algorithms, and new product standards, requiring long-term technological accumulation and continuous R&D investment. “As the technical barriers continue to rise, industry reshuffling will accelerate. Small and medium-sized manufacturers lacking technological depth and resource integration capabilities will gradually exit, while leading enterprises will dominate.”

Xilinmen claims that by consolidating its core mattress business, it has made breakthroughs in smart sleep. Based on its self-developed “Three-Stage Sleep Aid Theory,” Xilinmen has successfully upgraded core technologies such as flexible air cushions and intelligent sleep monitoring systems, achieving breakthroughs in dynamic zoning of mattress firmness and adaptive sleep environment matching; core technologies like air springs and active sleep aid have been industrialized.

Xilinmen states that its self-developed “air spring” technology forms the core support for its adaptive adjustment capabilities, creating a patent barrier. As of the third quarter of 2025, revenue from its smart home products accounted for over 3%. As scale expands, the company will gradually strengthen control over the entire supply chain. To accelerate transformation, Xilinmen is also increasing investments. The company said that in 2023, 2024, and the first three quarters of 2025, cash outflows from investment activities mainly stem from new capacity expansion and smart upgrade investments, including multiple production bases and equipment in northern China, Jiangxi, Henan, and other regions, as well as smart renovation projects at the Henan base.