香港聯合交易所有限公司
(香港交易及結算所有限公司全資附屬公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)
The Stock Exchange of Hong Kong Limited
CENSURES:
1. New Century Healthcare Holding Co. Limited (Stock Code: 1518) (Company);
2. Mr Jason Zhou, executive director, chairman and CEO;
3. Ms Xin Hong, executive director;
4. Mr Xu Han, executive director;
CRITICISES:
5. Mr Jiang Yanfu, independent non-executive director;
6. Mr Sun Hongbin, independent non-executive director; and
7. Mr Guo Qizhi, former non-executive director;
AND FURTHER DIRECTS:
the Company to conduct an independent internal control review, and each of the above directors to attend training.
The above parties were found to have breached various requirements under the Listing Rules in relation to a framework agreement which the Company entered into with its connected person (BJL) in 2016. BJL was a joint venture owned by, amongst others, Mr Zhou.
Under the framework agreement, the Company agreed to provide hospital consulting services to BJL. The agreement did not specify the timing for BJL’s settlement of service fees payable to the Company.
Between 2016 and 2021, a substantial amount of service fees remained unsettled. The executive directors, Mr Zhou, Ms Xin and Mr Xu, repeatedly allowed BJL to delay the payment without reporting BJL’s deteriorating financial condition and business performance, and certain repayment plans agreed between the Company and BJL, to the board of directors of the Company (Board). Such information was also not disclosed to the Company’s independent shareholders when the Board sought their approval for renewing the framework agreement.
The audit committee members, Mr Jiang, Mr Sun and Mr Guo, were aware of BJL’s prolonged delayed or non-payment of service fees, but they did not procure the Company to take adequate steps to safeguard its interests. Subsequently, BJL defaulted on the outstanding fees of RMB140 million, resulting in the Company recording an impairment loss of RMB105 million in 2022.
The above parties did not contest their respective breaches of the Listing Rules and accepted the sanctions and directions imposed on them.
Key messages:
Directors must stay vigilant that no favour or advantages are conferred on any connected parties. They must take proactive and adequate steps to safeguard the interests and assets of a listed issuer by ensuring that all connected transactions are compliant with the listed issuer’s internal controls and the Listing Rules.
Audit committee members serve an important role in the board’s oversight of a listed issuer’s risk management and internal controls. They are expected to cast an eye over the issuer’s business decisions and transactions. In particular, they should take the lead where a potential conflict of interest arises, rather than just relying on the responsible directors or representations of executive management. They should also ensure accuracy and completeness of information in corporate communications.
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