Sinolink Securities Co.Ltd(600109)
About Hangzhou Baicheng Pharmaceutical Technology Co., Ltd
Verification opinions of internal control evaluation report in 2021
On November 9, 2021, the China Securities Regulatory Commission approved and issued the reply on Approving the registration of initial public offering of shares of Hangzhou Baicheng Pharmaceutical Technology Co., Ltd. (CSRC license [2021] No. 3566), and approved the registration application of initial public offering of shares of the company The specific conditions of the company’s initial public offering of shares (hereinafter referred to as “Baicheng”) on the “Baicheng” or “Baicheng Pharmaceutical Co., Ltd.”, hereinafter referred to as “Baicheng” as the “important recommendation institution”, are as follows:
It is the responsibility of the board of directors of the company to establish, improve and effectively implement internal control, evaluate its effectiveness and truthfully disclose the internal control evaluation report in accordance with the provisions of the enterprise’s internal control standard system. The objective of the company’s internal control is to reasonably ensure the legal compliance of operation and management, asset safety, authenticity and integrity of financial reports and relevant information, improve operation efficiency and effect, and promote the realization of development strategy. The board of directors, the board of supervisors, directors, supervisors and senior managers of the company ensure that there are no false records, misleading statements or major omissions in the contents of the report period, and bear joint and several legal liabilities for the authenticity, accuracy and completeness of the contents of the report. Due to the inherent limitations of internal control, it can only provide reasonable assurance for the realization of the above objectives. In addition, due to the change of circumstances, the internal control may become inappropriate, or the degree of compliance with control policies and procedures may be reduced. According to the internal control evaluation results, it is speculated that the effectiveness of internal control in the future has a certain risk.
The company establishes and implements internal control, adheres to the principle of “comprehensiveness, importance, checks and balances, adaptability and cost-effectiveness”, and considers the following basic elements: internal environment, control activities, risk and evaluation, information and communication and internal supervision.
2、 Internal control evaluation conclusion
According to the identification of major defects in the company’s internal control over financial reporting, on the benchmark date of the internal control evaluation report, the company has no major defects in the internal control over financial reporting. The members of the board of directors believe that the company has maintained effective internal control over financial reporting in all major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations. According to the identification of major defects in the company’s internal control over non-financial reports, the company found no major defects in the company’s internal control over non-financial reports on the benchmark date of the internal control evaluation report.
There are no factors affecting the evaluation conclusion of the effectiveness of internal control from the base date of the internal control evaluation report to the date of issuance of the internal control evaluation report. 3、 Introduction to the company’s internal control (I) scope of internal control evaluation
The company determines the main units, matters and high-risk areas included in the evaluation scope according to the risk oriented principle. The main units included in the evaluation scope include the company and its subsidiaries. The total assets of the units included in the evaluation scope account for 100% of the total assets in the company’s consolidated financial statements, and the total operating revenue accounts for 100% of the total operating revenue in the company’s consolidated financial statements. The high-risk areas of focus mainly include: Sales and collection control, procurement control, asset control, financing and investment control, related party transaction control, use control of raised funds, and internal control of financial report management. The evaluation scope covers all economic businesses and relevant posts within the company, and the key control points in the process of business processing are implemented to all links of decision-making, implementation, supervision and management.
The above units, businesses and matters included in the evaluation scope and high-risk areas cover the main aspects of the company’s operation and management, and there are no major omissions. (II) internal environment construction of the company
1. Corporate governance structure
Corporate governance structure is not only the basis and premise of internal control, but also an important content of internal control evaluation. The company has established the general meeting of shareholders, the board of directors and the board of supervisors according to law, and established rules and regulations with the rules of procedure of the general meeting of shareholders, the rules of procedure of the board of directors, the working rules of independent directors and the rules of procedure of the board of supervisors as the main framework, The work rules of the strategic development committee, the nomination committee, the audit committee and the remuneration and assessment committee have been formulated to further standardize the work flow of each professional committee of the board of directors and be implemented in the work of each professional committee. It defines the responsibilities, authorities, procedures and obligations of the general meeting of shareholders, the board of directors, the board of supervisors and the management in terms of decision-making, implementation and supervision, and forms a governance structure with scientific division of labor among power institutions, decision-making institutions, business institutions and supervision institutions, each performing its own responsibilities and effective checks and balances, so as to ensure that each institution and personnel exercise their rights and perform their duties in accordance with the system and norms, Lay a solid foundation for the standardized operation and long-term and healthy development of the company.
① Shareholders and general meetings
As the highest authority of the company, the general meeting of shareholders decides the company’s business policies and investment plans, and deliberates and approves major matters of the company. The convening and convening procedures of the general meeting of shareholders, the qualifications of the personnel attending the general meeting of shareholders and their voting procedures are in accordance with the provisions of the company law, the articles of association, the rules of procedure of the general meeting of shareholders and other relevant laws and regulations. The general meeting of shareholders is witnessed by lawyers and issued legal opinions. During the reporting period of 2021, the company held a general meeting of shareholders.
② Directors and board of directors
The board of directors of the company is responsible for the general meeting of shareholders. The board of directors of the company is composed of 9 directors, including 3 independent directors. Under the board of directors, there are four special committees: the strategic development committee, the nomination committee, the remuneration and assessment committee and the audit committee, and the working rules of the strategic development committee, the working rules of the nomination committee, the working rules of the audit committee and the working rules of the remuneration and assessment committee have been formulated. All the members of the special committees are composed of directors, Among them, the independent directors of Nomination Committee, salary and assessment committee and audit committee account for the majority. During the reporting period of 2021, the board of directors of the company held four meetings.
③ Supervisors and board of supervisors
The board of supervisors of the company is composed of three supervisors, including one employee supervisor. The supervisors of the company can exercise the supervision function based on the principle of being responsible to all shareholders and supervise the legitimacy of the operation of the company and the performance of duties by directors, managers and other senior managers. During the reporting period, the meetings of the board of supervisors can be convened and held in accordance with the regulations, and the meeting minutes are accurate, complete and properly kept.
④ General manager
The general manager is fully responsible for the daily operation and management activities of the company and organizes the implementation of the resolutions of the board of directors. The company has formulated the working rules for the general manager, which stipulates the powers and obligations of the general manager, the general manager meeting system, the general manager reporting system and so on. The formulation and effective implementation of these systems ensure the effective implementation of various decisions of the board of directors, and improve the operation and management level and risk prevention ability of the company.
2. Organizational structure
The principle of separation of duties and responsibilities of each unit has been implemented in a scientific and effective way, and the nature of each unit’s internal organization and control has been determined.
At the same time, we will earnestly achieve “five independence” from the controlling shareholder of the company. 3. Human resources
According to the development of business and scale, the company has established a matching human resources organizational structure and power and responsibility system, emphasizing that personal development is consistent with the development objectives of the enterprise. The human resources department of the company has formulated human resources systems such as promotion and reward and punishment system, employee training management system, monthly work plan and assessment management method and employee performance management method, which defines the contents of employee selection and promotion, training and development, performance and salary, so as to ensure the effective development of human resources business, Continuously improve the ability of human resources to support the company’s strategy. (III) internal control activities
1. Sales and collection control
The company has formulated the contract management system and accounts receivable management system, standardized and controlled the main links of sales business through continuously improving a series of management methods, defined the responsibilities and authorities of each post, and ensured the separation of incompatible posts. The content of sales control covers the formulation of sales plan, approval of sales contract, collection management, customer development and management and other related matters, forming a strict management system and authorization review procedure. At the same time, the information management and collection system of accounts receivable are strictly controlled in combination with the pharmaceutical research center, medical department, business development center and finance department. The control measures of sales and collection during the reporting period were effectively implemented.
2. Purchase control
The company has formulated the procurement management system, fixed assets management system, supplier management procedures, etc. through the control of the main links of material procurement, clinical service procurement and fixed assets procurement, the separation of incompatible posts is set. Clarify the responsibilities and approval authorities of purchase requisition, approval, purchase, acceptance, warehousing, payment, inventory and other links, apply for asset procurement according to the formulated budget plan, and purchase major instruments and equipment only after passing the feasibility demonstration. Sort out the suppliers of previous years, include the qualified suppliers into the daily cooperation list, and use the tripartite evaluation form to control the procurement risk for new suppliers. The company has formulated various cost approval regulations, which are reviewed level by level according to the amount. During the reporting period, the procurement control measures were effectively implemented.
3. Asset management control
The company has established a post responsibility system for physical asset management, which can control the key links such as acceptance and warehousing, receiving and issuing, storage and disposal of physical assets, and has taken measures such as division of responsibilities, regular physical inventory, property records, account verification and property insurance, which can effectively prevent the theft, theft, damage and major loss of various physical assets.
4. Use control of raised funds
In order to standardize the management and application of the company’s raised funds and protect the interests of investors, the measures for the management of raised funds are formulated in combination with laws and regulations and the actual situation of the company, which clearly stipulates the storage, use, investment direction change, management and supervision of raised funds, so as to ensure that the raised funds are used exclusively. In 2021, the company’s raised funds were used in accordance with the system, and the control measures could be effectively implemented.
5. Management and control of related party transactions
In order to standardize the company’s related party transactions, ensure the fairness of the company’s related party transactions and safeguard the rights and interests of the company and all shareholders of the company, the company has formulated the management measures for related party transactions, which clearly stipulates the content of related party transactions, the scope and recognition standards of related parties, as well as the review procedures of related party transactions, the implementation of related party transactions and the information disclosure of related party transactions, Ensure that related party transactions are “fair, just, open, legal and reasonable”. When a transaction occurs between the company and related parties, it shall carefully perform the decision-making procedures of related transactions in strict accordance with the regulations, ensure the fairness of the transaction, and timely and fully disclose the related transactions. During the reporting period, the company did not have any related parties occupying the company’s funds. The clinical services purchased from the related party Dongyang Hengdian hospital have fulfilled the approval procedures and signed a written agreement as required. The rights, obligations and legal responsibilities of both parties to the transaction are clear, and the pricing of related party transactions is fair.
6. Financing and investment management control
The company has formed a management system for financing business, which can reasonably determine the financing scale and financing structure, select appropriate financing methods, and strictly control financial risks to reduce capital costs. The funds raised by the company did not deviate seriously from the original plan.
In order to strictly control the investment risk, the company has formulated the foreign investment management system and implemented the responsibility system for major investment decisions. The corresponding foreign investment authority is concentrated in the company’s headquarters (using the mechanism that different investment amounts are decided by the power organs at different levels of the company). All branches are not allowed to invest abroad without authorization. Strong management of investment project initiation, evaluation, decision-making, implementation, management, income, investment disposal and other links. The company has not seriously deviated from the company’s investment policies and procedures.
7. Financial report management control
In order to standardize accounting and information disclosure, improve the quality of accounting information, ensure the legal compliance, authenticity and integrity of financial reports, and protect the legitimate rights and interests of investors, creditors and other stakeholders, the company has established major control processes such as accounting business processing, changes in accounting policies and accounting estimates, and preparation and review of financial reports, Reasonably set up departments and posts related to financial reports, clarify responsibilities and authorities, and clarify the control procedures and division of responsibilities for accounting, report preparation, review and approval. (IV) risk assessment
The company has formulated the long-term overall goal of becoming a trusted partner, a respected company and a sustainable development company, supplemented by specific strategies and business process plans to clearly convey the business objectives to every employee. The company has established an effective risk assessment process and initially established a risk control structure composed of the general meeting of shareholders, the board of directors, the board of supervisors and the management, as well as the internal audit department, the audit committee and business QA. Relying on the professional departments and personnel such as finance, market, law, organization and personnel, the company can identify and deal with the possible business risks, including Environmental risk, financial risk and other significant and generally influential changes. (V) information system and communication
The company has established a more comprehensive information collection, sorting, analysis and transmission system, and uses modern information platforms such as computer network system to make the information transmission between management levels, departments, employees and management more rapid, smooth, convenient and effective. The company has established an OA system to improve the efficiency of internal information exchange. Clarify the transmission and collection procedures of internal major information to ensure that the company’s information can be effectively managed and disclosed in a timely, true, accurate and complete manner.
(VI) supervision of control
In accordance with the company law, securities law, Shenzhen Stock Exchange self regulatory guidelines for listed companies No. 2 – standardized operation of GEM listed companies, articles of association and other regulations, the company has established an internal audit department to regularly evaluate various internal controls. At the same time, it has established various mechanisms to enable relevant personnel to perform their normal duties, To a considerable extent, we can obtain the evidence of the effective operation of internal control; On the other hand, confirm the internal information or point out the existing problems through external communication. The management of the company attaches great importance to the reports and suggestions of various functional departments and regulatory bodies of internal control, and takes various measures to correct the deviations in the control operation in time. 4、 Basis of internal control evaluation and identification standard of internal control defects
The company organizes and carries out internal control evaluation according to the requirements of the enterprise internal control standard system and in combination with the company’s internal control related systems and evaluation methods.
Internal control defects are divided into major defects, important defects and general defects. The board of directors of the company has studied and determined the applicable standards for the identification of internal control defects of the company with reference to the identification requirements of the basic norms and relevant supporting guidelines, combined with the factors such as the company’s scale, operation, industry characteristics and risk level
