Securities code: 000007 securities abbreviation: * ST new Announcement No.: 2022-020 Shenzhen Quanxinhao Co.Ltd(000007)
With regard to the announcement on the reply to the attention letter [2022] No. 75 of the company Department of Shenzhen Stock Exchange, the company and all members of the board of directors guarantee that the content of information disclosure is true, accurate and complete, and there are no false records, misleading statements or major omissions.
Shenzhen Quanxinhao Co.Ltd(000007) (hereinafter referred to as “the company”) recently received the concern letter [2022] No. 75 from the company management department of your firm (hereinafter referred to as “the concern letter”). After receiving the letter of concern, the board of directors of the company attached great importance to it, earnestly implemented the requirements of the letter and arranged relevant replies. The relevant reply is as follows:
1. In the early stage, your company faced a large amount of litigation related losses due to Lian Weifei’s fraudulent borrowing in the name of the company, and Lian Weifei promised to compensate for this. On December 6, 2021, your company announced that the company and Lian Weifei signed the execution settlement agreement with the plaintiffs Wu Haimeng and Wang Peiyan respectively, and reached a settlement on the total execution amount of 160 million yuan claimed in the arbitration case of Shen dx20170235, the arbitration case of Shen dx20170236 and the litigation case of (2020) Yue 03 min Chu 3211. It was agreed that before December 30, 2022, Your company will pay 120 million yuan in installments, and Lian Weifei will bear the remaining payment obligations. After this settlement, the amount borne by your company in the above-mentioned cases is reduced by about 40 million yuan, and the amount of accrued credit impairment loss is reversed accordingly and recognized as non recurring profits and losses of the current period. Your company’s reply to our letter of concern and the verification opinions of relevant lawyers in the early stage show that your company is uncertain about the financial strength and financial status of Lian Weifei and cannot confirm whether it has the ability to undertake the remaining payment obligations; Wu Haimeng and Wang Peiyan have no right to apply for resumption of execution against your company according to the original amount if Lian Weifei defaults or delays in payment after your company has paid 120 million execution payment. Please your company: (1) explain the actual enforceability of relevant agreements and whether there are major uncertainties in the follow-up implementation in combination with the actual implementation progress of the settlement agreement so far, the performance ability and willingness of your company and Lian Weifei.
Company reply:
According to the execution settlement agreement, the company shall pay 120 million yuan to Party A (Wang Peiyan and Wu Haimeng) in three installments from the day when the execution court presides over the execution settlement, before the end of April 2022 and before the end of 2022. The overdue payment company shall bear the overdue fine. The source of funds is mainly the company’s own funds, including cash of about 75 million yuan and receivables to be collected of about 200 million yuan. The company mainly pays the settlement with its own funds, and the gap is prepared to be solved through the recovered receivables. Up to now, the company has normally performed its payment obligations in accordance with the settlement agreement. The aforesaid self owned funds of the company have covered all the amounts to be paid for this settlement, and the company has the ability and willingness to eliminate the problems left over by history. Due to the fund gap of settlement payment (about 45 million yuan as of February 15, 2022), the company plans to solve it by recovering receivables, so whether the final settlement payment can be completed is still uncertain due to the recovery of receivables. The company is uncertain about Lian Weifei’s ability and willingness to perform the contract. As long as the company completes the payment of the execution amount in accordance with the agreement, Wu Haimeng and Wang Peiyan have no right to apply for the resumption of the execution of the company according to the original amount, which will have no impact on the company. Therefore, this settlement is enforceable.
As the company mainly pays the settlement with its own funds, the gap (about 45 million yuan as of February 15, 2022) is to be solved through the recovered receivables. The company plans to give priority to recovering 118 million yuan of Ningbo Jiashan share transfer (the transfer was 120 million yuan, and 2 million yuan has been recovered). In this regard, the company has communicated with Beijing Hongjun, The other party expressed its willingness to actively cooperate. It is expected to pay the remaining repurchase price of the first phase of 98 million yuan before April 15, 2022, and pay the remaining repurchase price of 20 million yuan six months after the remaining repurchase price of the first phase is paid, and the company cooperates with the removal of the seizure and freezing measures of the repurchase object agreed in the repurchase agreement. If the company’s own funds are recovered normally, the amount agreed in the implementation settlement agreement can be covered. Due to the uncertainty in the recovery of receivables, there is a certain uncertainty in the payment of the balance gap. The company will fully communicate with relevant parties and make every effort to collect, so as to ensure that the settlement agreement can be performed as agreed. Please pay attention to the risks.
(2) Explain whether Wu Haimeng and Wang Peiyan can still claim creditor’s rights from your company in case of Lian Weifei’s breach of contract, whether your company still faces great risk of litigation related compensation in the future, and whether your company has other agreements or potential arrangements with Wu Haimeng, Wang Peiyan, Lian Weifei and other relevant parties. Ask a lawyer to check and express clear opinions. Company reply:
According to the implementation settlement agreement, Wu Haimeng and Wang Peiyan shall not apply for resumption of execution of the company for any reason after the company has completed the payment of the cumulative execution amount of 120 million yuan. Accordingly, after the company completes the payment of the execution amount, if Lian Weifei defaults or delays the payment, Wu Haimeng and Wang Peiyan have no right to apply for the resumption of the execution of the company according to the original amount.
In order to minimize losses and safeguard shareholders’ rights and interests, the company has been actively negotiating with Wu Haimeng and Wang Peiyan, and finally reached an implementation settlement agreement. The company has truly, accurately and completely fulfilled the obligation of information disclosure in strict accordance with relevant laws and regulations, and there is no other agreement or potential arrangement with Wu Haimeng, Wang Peiyan, Lian Weifei and other relevant parties.
Lawyer’s verification opinion:
According to the verification of our lawyers, on December 2, 2021, Xinhao, Lian Weifei and Wu Haimeng signed the execution settlement agreement on shendx20170235 arbitration case and Shen dx20170236 arbitration case. The parties agreed that Xinhao would pay Wu Haimeng an execution amount of 90 million yuan, and the rest of the expenses of these cases would be borne by Lian Weifei, If Xinhao completes the payment of the above execution funds, Wu Haimeng promises not to apply for the resumption of execution of Xinhao for any reason.
On the same day, Xinhao, Lian Weifei and Wang Peiyan signed an execution settlement agreement on the (2020) Yue 03 min Chu No. 3211 lawsuit. The parties agreed that Xinhao would pay Wang Peiyan an an execution amount of 30 million yuan, and the rest of the expenses of the case would be borne by Lian Weifei. If Xinhao completed the payment of the above execution amount, Wang Peiyan promised not to apply for the resumption of Xinhao for any reason.
According to Article 8 of the provisions of the Supreme People’s Court on Several Issues concerning the implementation of reconciliation (2020 Amendment), “when the implementation of the settlement agreement is completed, the people’s court shall close the case.” Article 9 stipulates that “if the party subjected to execution fails to perform the execution settlement agreement, the applicant for execution may apply for the resumption of the execution of the original effective legal instrument, or bring a lawsuit to the execution court for the performance of the execution settlement agreement.
”Article 11 stipulates that “if the person applying for execution applies for resumption of execution on the ground that the party subjected to execution fails to perform the execution settlement agreement, and the people’s court finds the reason tenable after examination, it shall rule to resume execution; if there are any of the following circumstances, it shall rule not to resume execution: (III) the party subjected to execution is performing its obligations in accordance with the execution settlement agreement”.
Accordingly, Xinhao and Lian Weifei have reached the execution settlement agreement with Wu Haimeng and Wang Peiyan respectively. As the parties to the execution settlement agreement, Xinhao has the obligation to pay the execution payment to Wu Haimeng and Wang Peiyan, and Lian Weifei has the responsibility of Shen dx20170235 arbitration case, Shen dx20170236 arbitration case (2020) the repayment obligation of the remaining part of the execution payment claimed in Yue 03 min Chu No. 3211 lawsuit after deducting the payment already paid by Xinhao in the execution settlement agreement. After Xinhao has paid an accumulated execution payment of 120 million yuan, Xinhao has completed the obligation to pay the execution payment agreed in the execution settlement agreement. If Lian Weifei defaults, Wu Haimeng and Wang Peiyan may, in accordance with Article 9 of the provisions of the Supreme People’s Court on Several Issues concerning the implementation of the settlement agreement (2020 Amendment), apply to resume the implementation of the original effective legal instrument for Lian Weifei’s failure to perform the implementation of the settlement agreement or bring a lawsuit to the enforcement court for the performance of the implementation of the settlement agreement. However, since the implementation settlement agreement has cut the obligations of Xinhao and Lian Weifei, under the condition that Xinhao has completed the implementation of the implementation settlement agreement, in accordance with item (III) of Article 11 of the provisions of the Supreme People’s Court on several issues of implementation settlement, Wu Haimeng When Wang Peiyan applies to resume the execution of the original effective legal instrument on the ground that Lian Weifei fails to perform the execution settlement agreement, the court will rule not to resume the execution.
According to the second paragraph of Article 13 of the Civil Procedure Law of the people’s Republic of China, “the parties have the right to dispose of their own civil rights and litigation rights within the scope prescribed by law”. Civil litigation rights are the procedural rights granted by law to the parties in civil cases, although Wu Haimeng Wang Peiyan has promised in the execution settlement agreement that after Xinhao completes the payment of the above-mentioned execution amount, he will not apply for the resumption of execution of Xinhao for any reason, but it cannot be ruled out that Wu Haimeng and Wang Peiyan use the civil litigation rights conferred by law when Lian Weifei fails to fulfill the repayment obligation of the remaining part of the payment already paid by Xinhao in the execution settlement agreement, The possibility of bringing a lawsuit to the court for the performance of the settlement agreement. In view of the arbitration case of Shen dx20170235, the arbitration case of Shen dx20170236 and the litigation case of (2020) Yue 03 min Chu 3211, Xinhao and Lian Weifei reached the implementation settlement agreement with Wu Haimeng and Wang Peiyan respectively on December 2, 2021, and the relevant subjects reached the latest agreement on the payment subject and payment amount of the above cases. Under the execution settlement agreement, Xinhao needs to pay an execution payment of 120 million yuan in total according to the agreed time. If Xinhao has paid 120 million yuan of execution money as agreed, that is, when Xinhao has completed its obligation to pay the execution money as agreed in the execution settlement agreement, and Lian Weifei breaches the contract, Wu Haimeng and Wang Peiyan have the right to, in accordance with Article 13 of the Civil Procedure Law of the people’s Republic of China In accordance with the relevant provisions of Article 9 of the provisions of the Supreme People’s Court on Several Issues concerning the implementation of reconciliation, a separate lawsuit shall be filed to claim creditor’s rights. The exchange believes that if Wu Haimeng and Wang Peiyan separately apply for filing for claims on the ground of Lian Weifei’s breach of contract, in view of Xinhao’s completion of the relevant provisions of the implementation settlement agreement, Xinhao will bear small risks for Lian Weifei’s breach of the provisions of the implementation settlement agreement.
In conclusion, after Xinhao completes the payment of the execution payment, if Lian Weifei defaults or delays the payment, when Wu Haimeng and Wang Peiyan apply for the resumption of the original effective legal instrument on the ground that Lian Weifei fails to perform the execution settlement agreement, the court will rule not to resume the execution. If Lian Weifei is in breach of contract or overdue payment, and Wu Haimeng and Wang Peiyan file a separate lawsuit to claim the creditor’s rights, in view of Xinhao’s completion of the relevant provisions of the implementation settlement agreement, Xinhao will bear small risks for Lian Weifei’s violation of the provisions of the implementation settlement agreement. According to Xinhao’s instructions, except for the implementation settlement agreement, the company has no other agreements or potential arrangements with Wu Haimeng, Wang Peiyan, Lian Weifei and other relevant parties.
(3) In combination with the foregoing, explain whether your company is prudent and reasonable to reverse the relevant bad debt losses in 2021, and whether there is a situation of using the settlement agreement to avoid termination of listing. The annual audit accountant is requested to check and express clear opinions in combination with the latest situation.
Company reply:
As mentioned above, in order to minimize losses and safeguard shareholders’ rights and interests, the company has been actively negotiating with Wu Haimeng and Wang Peiyan, and finally reached an implementation settlement agreement. It is prudent and reasonable for the company to turn back the relevant bad debt losses according to the settlement agreement, safeguarding the interests of all shareholders of the company, and there is no case of using the settlement agreement to avoid the termination of listing. Whether the company can turn back relevant bad debt losses in 2021 needs to be confirmed after the audit procedures for relevant impairment tests are completed. At present, there is still uncertainty.
Annual audit accountant’s opinion:
① Verification procedure
The annual audit accountant has implemented the following verification procedures:
A. Review the settlement agreement of the company and analyze relevant matters;
B. Check all the materials of litigation and arbitration related to Lian Weifei case provided by the company, and check with the book records of the company;
C. Check the company’s “other receivables – Lian Weifei” Sub Ledger and relevant accounting voucher attachments;
D. By the end of 2021, Xinhao company and Beijing Hongjun signed the agreement on relevant arrangements for the performance of the stock pledge contract;
E. Analyze whether the accounting treatment method of the estimated credit loss disclosed above by the company is appropriate according to the application guidelines of accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments and accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments.
② Verification opinions
After verification, the annual audit accountant believes that:
We are auditing the annual financial statements of Shenzhen Quanxinhao Co.Ltd(000007) 2021. Whether the company can reverse the relevant bad debt losses in 2021 needs to be confirmed after the audit procedures for the relevant impairment test are completed. According to the information obtained, it has not been found that the company has used the settlement agreement to avoid the termination of listing; According to the lawyer’s opinion, after Xinhao completes the payment of the execution payment, if Lian Weifei defaults or delays the payment, Wu Haimeng and Wang Peiyan apply for filing a separate case on the ground of Lian Weifei’s default to claim the creditor’s rights. Xinhao bears a small risk for Lian Weifei’s violation of the matters agreed in the execution settlement agreement. Further audit procedures to be implemented in the later stage are mainly as follows:
A. Obtain the court’s ruling on the implementation of the settlement agreement and verify whether the court’s ruling is consistent with the settlement agreement;
B. Interview Wu Haimeng, Wang Peiyan and other relevant personnel or entrusted agents to understand the intention of the settlement, the process of the settlement and the main business reasons for the settlement;
C. Obtain and verify the confirmation document that Beijing Hongjun is confident that more than half of the members of the board of directors are elected;
D. Obtain all legal procedures to ensure that Xinhao company can actually receive the compensation of 80 million yuan before November 30, 2022, including but not limited to: applying to the court for the legal procedures of enforcing the Pledged Shares before the expiration of the pledge, the legal procedures of paying the execution proceeds directly from the court account to the company, and verify the relevant legal procedures of the company
