ST Xilinmen's controlling shareholder Zhejiang Huayi Smart Manufacturing and its concert party Huahan Investment had their pre-restructuring applications accepted by Yuecheng District People's Court on May 29, according to case decisions (2026)浙0602破申77号 and (2026)浙0602破申78号. The applications stem from a debt crisis involving 391 million yuan in non-operating fund occupation by the controlling shareholder and its affiliates, plus 530 million yuan in irregular guarantee balances. The company's stock experienced abnormal trading volatility on May 28, May 29, and June 1, with cumulative closing price deviation exceeding 12%, followed by a limit-up close at 9.74 yuan per share on June 2 and a limit-down opening on June 3 that closed at 9.25 yuan per share at midday. Whether the pre-restructuring will lead to a change in company control remains uncertain and depends on subsequent restructuring plans and final court rulings.
Court Accepts Pre-Restructuring Applications from Controlling Shareholder and Concert Party
On the evening of June 1, ST Xilinmen announced that Yuecheng District People's Court issued decisions on May 29 accepting the pre-restructuring applications from controlling shareholder Zhejiang Huayi Smart Manufacturing and its concert party Shaoxing Yuecheng District Huahan Equity Investment Partnership (Limited Partnership). The applications were filed by Huayi Smart Manufacturing and Huahan Investment themselves. ST Xilinmen and its other subsidiaries are not within the scope of this pre-restructuring application. Zhejiang Yueguang Law Firm has been selected as the pre-restructuring phase administrator to participate in related work. The applicants will cooperate with the court and phase administrator in conducting pre-restructuring work according to law.
Company Reports 391 Million Yuan Fund Occupation and 530 Million Yuan Irregular Guarantees
The current crisis traces back to March when the company's subsidiary bank account funds were illegally transferred, and violations including controlling shareholder fund occupation and irregular guarantees were exposed. ST Xilinmen discovered through self-inspection that subsidiary Xitu Technology had a total of 100 million yuan in account funds illegally transferred. The company immediately filed a report and froze relevant accounts, with cumulative preserved funds exceeding 900 million yuan. Subsequent investigation revealed the fund transfers were related to external financing by actual controller Chen Ayu, the controlling shareholder, and their affiliates, with the transferring party being creditors of the controlling shareholder and its affiliates.
According to the latest announcement, ST Xilinmen's controlling shareholder and its affiliates have a non-operating fund occupation balance of 391 million yuan, and irregular guarantee balance totals 530 million yuan. The company stated it will declare claims in the bankruptcy restructuring procedure according to legal provisions to properly resolve issues including fund occupation and irregular guarantees, safeguarding the legitimate rights of the company and minority shareholders.
Since May, creditors have begun concentrated judicial recovery actions. ST Xilinmen has faced successive lawsuits, with cumulative litigation claims exceeding 870 million yuan within one month. The company's internal control report for 2025 received a negative opinion from auditors, and the stock has been subject to other risk warnings (ST) since April 28.
Controlling Shareholder Stakes Fully Frozen and Pledged
Dragged down by massive debts, all shares held by the actual controller, controlling shareholder, and related parties in the listed company have fallen into judicial freeze status. As of the announcement disclosure, Huayi Smart Manufacturing holds 23.03% of ST Xilinmen shares, with all holdings frozen and subject to rotation freeze, and a pledge ratio of 75.37%. Huahan Investment holds 9.99% stake, also with 100% equity judicially frozen and a pledge rate of 77.18%.
According to the Notice Letter from Huayi Smart Manufacturing and Huahan Investment, the court's initiation of pre-restructuring for them does not represent formal acceptance of their restructuring application. Whether the applicants will enter the restructuring procedure remains uncertain, and whether restructuring will succeed also carries uncertainty. Whether this matter will affect the company's control depends on subsequent restructuring plans and the court's final ruling, and whether it will lead to a change in company control remains uncertain.
ST Xilinmen States Operations Remain Normal and Independent
ST Xilinmen emphasized in its announcement that the company has independent and complete business and autonomous operation capabilities, and is independent from controlling shareholder Huayi Smart Manufacturing and its concert party Huahan Investment in terms of business, personnel, assets, organization, and finance. The company's production and operation conditions are normal, and the above matters will not have a substantial impact on the company's daily production and operations. Company management will continue to perform operational management work well to ensure stable company operations.
Beijing Zhongyin Law Firm lawyer Cui Jie analyzed that generally speaking, pre-restructuring is to more smoothly transition to restructuring procedures and preserve the shell value of listed companies. Listed companies facing ST delisting risk with massive debts that cannot be resolved through normal financing can first address the urgent problem of mass litigation and execution through bankruptcy restructuring protection, potentially resolving debts through debt discounts and debt-to-equity swaps, then injecting new industries while stripping non-performing assets to preserve the listed company's shell value and public financing channels.
FAQ
What did Yuecheng District People's Court decide regarding ST Xilinmen's controlling shareholder on May 29?
Yuecheng District People's Court issued decisions (2026)浙0602破申77号 and (2026)浙0602破申78号 on May 29, accepting the pre-restructuring applications from ST Xilinmen's controlling shareholder Zhejiang Huayi Smart Manufacturing and its concert party Huahan Investment. Zhejiang Yueguang Law Firm was selected as the pre-restructuring phase administrator.
How much debt does ST Xilinmen's controlling shareholder owe the company?
According to the latest announcement, ST Xilinmen's controlling shareholder and its affiliates have a non-operating fund occupation balance of 391 million yuan and irregular guarantee balance totaling 530 million yuan. Since May, the company has faced accumulated litigation exceeding 870 million yuan.
What is the current status of the controlling shareholder's shareholdings in ST Xilinmen?
Huayi Smart Manufacturing holds 23.03% of ST Xilinmen shares, with all holdings frozen and subject to rotation freeze, and a pledge ratio of 75.37%. Concert party Huahan Investment holds 9.99% stake, with 100% equity judicially frozen and a pledge rate of 77.18%.
