On June 9, Hong Kong Exchanges and Clearing Limited (HKEX) took disciplinary action against Zhejiang Yongan Rongtong Holdings Co., Ltd. (former stock code: 08211, delisted) and six of its directors for transferring almost the entire cash balance of 166.7 million RMB to the controlling shareholder around the end of 2024 without complying with applicable GEM Listing Rules. The board remained unaware of the transfer for several weeks until the company secretary discovered it, and subsequent remedial actions were severely delayed. The violations stemmed from the company's failure to maintain adequate internal controls and directors' breach of fiduciary duties in safeguarding company assets and monitoring connected transactions under GEM Listing Rules.
HKEX Imposes Sanctions on Six Directors
HKEX issued a director unsuitability statement and censure against Zhan Fahui, the company's former chairman, executive director, and chief executive officer. The exchange issued statements of prejudice to investor interests and censures against Jin Lei, chairman and executive director at the time of delisting, and Zhou Youqin, former chief executive officer and executive director. HKEX censured Xia Zhenbo, non-executive director at delisting, Yuan Lingfeng, independent non-executive director, and Zhang Jianyong, independent non-executive director. The company and all directors involved did not contest their respective violations or responsibilities under GEM Listing Rules and agreed to accept the sanctions and directives imposed by HKEX.
Company Transferred 166.7 Million RMB Without Board Approval
The investigation found that around the end of 2024, the company transferred almost its entire cash balance of 166.7 million RMB to the controlling shareholder without following applicable GEM Listing Rules. The board learned of the transfer only after the company secretary discovered it several weeks later. Zhan Fahui violated his fiduciary duty to safeguard company assets by executing the transfer at the controlling shareholder's request without board approval or notification, without ensuring compliance with internal controls and GEM Listing Rules, and without establishing necessary safeguards.
Directors Failed to Fulfill Oversight and Remedial Duties
Jin Lei and Zhou Youqin failed to properly supervise company operations and did not detect the large fund transfer in a timely manner, violating their director duties. After discovering Zhan's transfer, relevant board members (Xia Zhenbo, Yuan Lingfeng, Zhang Jianyong, Jin Lei, and Zhou Youqin) failed to take timely remedial measures, violating their director duties. The delays included postponing the announcement of connected transactions, suspending Zhan Fahui's authority, signing written terms with the controlling shareholder, recovering transferred funds, and investigating the connected transaction and effectiveness of existing internal control measures. The board failed to ensure the company maintained adequate and effective internal control measures. The review revealed significant deficiencies in internal controls related to connected transaction monitoring and bookkeeping.
Yongan Rongtong Delisted in March 2026
Zhejiang Yongan Rongtong Holdings Co., Ltd. was incorporated on April 16, 2002, and listed on the HKEX Growth Enterprise Market (GEM) on November 8, 2002. The company's core business involved woven fabric production, sales, and weaving subcontracting. Main products included pure cotton fabrics and four-way stretch chemical fiber fabrics, relying on the Shaoxing Keqiao textile cluster for export and domestic sales. The company suspended trading on February 21, 2025. Under GEM Listing Rule 9.14A(1), the company had until February 20, 2026, to complete all resumption guidance and resume trading. After failing to meet the deadline, the GEM Listing Committee resolved to delist the company on February 27, 2026, and formally canceled its listing status on March 16, 2026. The company's auditor, Shinewing (HK) CPA Limited, resigned in January, refusing to continue due to the company's inability to provide complete accounts and significant doubts about the compliance of the 166.7 million RMB fund transaction, making it impossible to issue an audit report.
FAQ
What did HKEX announce on June 9 regarding Yongan Rongtong Holdings?
On June 9, HKEX took disciplinary action against Yongan Rongtong Holdings and six directors for transferring 166.7 million RMB to the controlling shareholder around the end of 2024 without complying with GEM Listing Rules, with the board remaining unaware for several weeks.
Why did Yongan Rongtong lose its listing status?
The company suspended trading on February 21, 2025, and had until February 20, 2026, to meet resumption guidance under GEM Listing Rule 9.14A(1). After failing to meet the deadline, the GEM Listing Committee resolved to delist on February 27, 2026, and formally canceled listing status on March 16, 2026.
What sanctions did HKEX impose on the directors?
HKEX issued a director unsuitability statement and censure against Zhan Fahui, statements of prejudice to investor interests and censures against Jin Lei and Zhou Youqin, and censures against Xia Zhenbo, Yuan Lingfeng, and Zhang Jianyong for violations of director duties and GEM Listing Rules.
