ST Mingcheng and several senior executives publicly reprimanded by the Shanghai Stock Exchange for information disclosure violations

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Shanghai Stock Exchange recently issued a disciplinary decision due to multiple violations of information disclosure by Wuhan Contemporary Mingcheng Cultural Sports Group Co., Ltd. (stock abbreviation: ST Mingcheng (Investor Protection), stock code: 600136). The decision publicly reprimands former chairman Yi Rentao, former financial director Li Zhenyu, former board secretary Gao Wei, and former director Yu Lingxiao, and criticizes former general manager Yan Aihua.

According to the administrative penalty decision issued by the Hubei Regulatory Bureau of the China Securities Regulatory Commission, ST Mingcheng was found to have multiple violations in information disclosure and regulatory operations, mainly in three areas.

First, the company failed to disclose related guarantees in its 2020 annual report, leading to significant omissions in the annual report. Specifically, this involved guarantees provided by related party Contemporary Investment for loans to Hubei Cooperation and its subsidiaries (amounting to 400 million and 260 million yuan respectively), as well as a full guarantee for the payment obligation of 150 million USD to the AFC for the controlling subsidiary New England Cayman. However, subsequent announcements from the company indicate that these guarantee responsibilities have been respectively lifted by court judgment or agreement in October and November 2023, and the company is not required to bear the corresponding guarantee responsibilities.

Second, the company’s 2020 and 2021 annual reports contain false records. In 2020, the company did not recognize the 21.01 million yuan equity repurchase payment owed to Wenxin Fund as a liability. In 2021, the company failed to recognize the 30 million yuan equity repurchase payment owed to Shangyu Maorong as a liability; at the same time, due to insufficient inventory impairment, it under-reported the inventory impairment provision by 98.0025 million yuan, resulting in inflated profits of 98.0025 million yuan for that year. Additionally, due to inaccurate goodwill impairment testing, it under-reported the goodwill impairment related to the acquisition of Qiangshi Media by 212.5152 million yuan, leading to inflated profits of 212.5152 million yuan for that year.

Third, the company failed to disclose arbitration information and related transactions as required. In 2022, the company did not timely disclose the Qiongqing City Yinchuan arbitration case involving 70 million yuan and the Heshan Anlang arbitration case involving 264 million yuan, and disclosed them only on June 18, 2022; at the same time, the equity transfer and repurchase agreement involving 20.97 million yuan with related party Shengdao Guoyu also constituted a related transaction that the company failed to disclose in a timely manner as required.

The Shanghai Stock Exchange pointed out in its disciplinary decision that ST Mingcheng’s aforementioned actions seriously violated the provisions of the Securities Law and the Shanghai Stock Exchange’s Listing Rules. The responsible individuals failed to act diligently and bear corresponding responsibility for the violations. The Shanghai Stock Exchange has reported this disciplinary action to the China Securities Regulatory Commission and the Hubei Provincial Local Financial Supervision Bureau, and it has been recorded in the integrity file of the listed company. The company is required to submit a rectification report confirmed by all directors and senior management within one month of receiving the decision letter.

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Editor: Xiaolang Express News