Exchange’s Disciplinary Action Against Ever Reach Group (Holdings) Company Limited (Stock Code: 3616), Four Directors and Five Senior Management Members

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. Ever Reach Group (Holdings) Company Limited (Company);
2. Mr Li Xiaobing (Mr Li), executive director of the Company;
3. Mr Wang Zhenfeng (Mr Wang ZF), executive director of the Company;
4. Mr Wang Quan (Mr Wang Q), executive director of the Company;
5. Ms Qi Chunfeng (Ms Qi), former executive director of the Company;
6. Ms Yu Liping (Ms Yu), financial controller of the Company;
7. Mr Cao Hongwei (Mr Cao), vice president of the Company and general manager of a subsidiary of the Company;
8. Mr Zhang Hao (Mr Zhang), former general manager of a subsidiary of the Company;
9. Mr Lu Jianchao (Mr Lu), deputy general manager of a subsidiary of the Company; and
10. Ms Shen Shuju (Ms Shen), general manager of a subsidiary of the Company.

(The directors identified at (2) to (5) above are collectively referred to as Directors. The management members identified at (6) to (10) are senior management members of the Company or its subsidiaries and collectively referred to as Relevant Management Members.)

AND FURTHER DIRECTS each of the Directors and Relevant Management Members to attend 21 hours of training. In respect of Ms Qi, attending such training would be a pre-requisite to any future appointment as a director of any company listed or to be listed on the Exchange.

This case concerns a series of prepayments made by the Company to various suppliers without adequate supporting documentation. As a result, the Company’s auditor flagged unresolved audit issues that prevented the completion of the FY2023 audit within the prescribed timeframe and led to a suspension of trading.

An independent investigation concluded that the prepayments formed part of a circular fund‑flow arrangement intended to alleviate liquidity pressure following the COVID-19 pandemic. Under this arrangement, the Company obtained bank loans purportedly for future projects and paid the proceeds to suppliers as prepayments, then sought refunds from such suppliers and redeployed the funds to finance unrelated ongoing project work.

The arrangement contravened applicable regulatory requirements and the Company’s internal control framework. Notwithstanding the Company ultimately recovering all prepayments, it exposed the Company to unnecessary risks, including regulatory exposure, the risk of delayed recovery or credit default, and additional interest costs.

The Exchange found that:

• The Directors were aware that the fund‑flow arrangement did not comply with internal and regulatory requirements, yet they approved and/or permitted its implementation and oversaw the redistribution of refunds to other projects. Through this conduct, the Directors failed to procure the Company’s compliance with the Listing Rules and breached their directors’ duties.
  
  
• The Relevant Management Members executed the fund‑flow arrangement and reallocated the refunds, caused, by action or omission, the Company’s Listing Rule breaches.

All parties admitted their respective breaches of and/or liabilities under the Listing Rules at an early stage of the Exchange’s intended disciplinary action. They accepted the sanctions and directions imposed by the Listing Committee.

Ends