After the short suspension, Fujian Qiaolong emergency equipment Co., Ltd. (hereinafter referred to as “Qiaolong emergency”) updated the prospectus and continued to impact the A-share market. The company plans to raise 622 million yuan in this IPO for Fujian Qiaolong emergency rescue equipment reconstruction and expansion project, Qiaolong emergency rescue service center construction project, R & D technology center upgrading project and supplementary working capital.
The reporter of Mingjing financial studio of Dazhong Securities News noted that at the beginning of the establishment of Qiaolong emergency, there was a situation of borrowing from the company after the founder invested. The total capital of the company’s establishment and the first capital increase was 10 million yuan, which came from the loan of the actual investor Lin Zhiguo from a third party. After the capital verification procedure was completed, Lin Zhiguo borrowed 9.5 million yuan from the company to repay the debt. Once borrowed for nearly ten years, the above arrears were finally paid off in the form of cash and non cash assets, and the repayment of interest was not mentioned.
As of the disclosure of the latest prospectus, Lin Zhiguo, the actual controller of Qiaolong emergency, together with his wife and children, directly or indirectly owned 76.59% of the shares of the company, which can exert a significant impact on the production and operation of the company. Combined with the fact that he occupied the company’s funds for ten years in the past, the risk of actual controller control has attracted attention.
invested and borrowed from the company for nearly ten years
Qiaolong emergency is an enterprise that successfully developed the hydraulic driven large flow drainage vehicle in China earlier. Under the operation of Founder Lin Zhiguo for 22 years, the company has become a leading enterprise in the field of hydraulic driven water pump technology in the field of water supply and drainage emergency rescue equipment in China. However, with the IPO of Qiaolong emergency at the beginning of this year, the prospectus disclosed exposed the behavior of borrowing funds after being funded by the founder in the history of Qiaolong emergency, which has been used free of charge for nearly 10 years.
The predecessor of Qiaolong emergency is Fujian Qiaolong Special Purpose Vehicle Co., Ltd. (hereinafter referred to as “Qiaolong Co., Ltd”), which was jointly invested and established by Lin Zhiguo and Lin Chaowang in 2000, with a registered capital of 5 million yuan, of which Lin Zhiguo invested 2.75 million yuan in currency and Lin Chaowang invested 2.25 million yuan in currency. It is noteworthy that the funds for the establishment of Qiaolong Co., Ltd. and the first capital increase in 2004 came from the actual investor Lin Zhiguo’s borrowing from a third party, including 5 million yuan at the time of establishment and 5 million yuan for the first capital increase in 2004.
In order to pay off the third-party loan owed by the capital contribution, chairman Lin Zhiguo lent 9.5 million yuan from the company after making the capital contribution. Qiaolong emergency said in the prospectus: “due to the instability of the company’s early business, in order to avoid idle funds, after the completion of the capital verification procedure, the actual investor Lin Zhiguo lent part of the two contributions of 9.5 million yuan to repay the debt, resulting in Lin Zhiguo’s debt of 9.5 million yuan to the company.”
It was not until 2010 that Lin Zhiguo returned all the debts of 9.5 million yuan to the company. The prospectus shows that from 2000 to 2010, Lin Zhiguo and his family successively paid off the debts owed to the company with cash or non cash assets. Rongcheng issued Rongcheng zhuanzi [2022] No. 361z0062 special review report on the repayment of 9.5 million yuan owed by shareholders: “according to our review, by the end of 2010, the shareholder’s loan of 9.5 million yuan recorded in the book had been repaid, which met the relevant provisions of the accounting standards for business enterprises in all major aspects.” Qiaolong emergency said: “in January 2022, the actual controller Lin Zhiguo transferred 1.5 million yuan in cash to the company to consolidate the physical debt repayment part of 1188600 yuan in the above repayment process.”
Lin Zhiguo and his wife and children hold more than 70% shares
It is worth mentioning that Qiaolong emergency has made two cash dividends during the reporting period – a cash dividend of 22.69 million yuan in 2019 and another cash dividend of 21 million yuan in 2021 (see figure I). It should be noted that the prospectus shows that the total shareholding of Lin Zhiguo and his wife and children has exceeded 70% since 2019. It is estimated that Lin Zhiguo and his wife and children have distributed more than 30 million yuan from the company through cash dividends.
Figure 1: main financial data and financial indicators of Qiaolong during the emergency reporting period
The actual controller’s risk control has become an unavoidable problem for Qiaolong emergency to be listed. As of the disclosure of the prospectus, Lin Zhiguo and his wife and children still held more than 70%. According to the prospectus, Huanyu technology holds 61.70% shares of Qiaolong emergency and is the controlling shareholder of the company; The actual controllers are Lin Zhiguo, Lin Qiuying, Lin lilun and Lin Lizhen. Among them, Lin Zhiguo and Lin Qiuying are husband and wife, Lin lilun is the son of Lin Zhiguo and Lin Qiuying, and Lin Lizhen is the daughter of Lin Zhiguo and Lin Qiuying. As of the signing date of the prospectus, Lin Zhiguo directly holds 4.55% of the shares of the company, Lin lilun directly holds 8.55% of the shares of the company, Lin Zhiguo, Lin Qiuying, Lin lilun and Lin Lizhen control 61.70% of the shares of the company through Huanyu technology, and Lin Lizhen indirectly holds 1.79% of the shares of the company through Huanlong investment, holding 76.59% of the shares of the company in total and 74.80% of the shares of the company in total. She is the actual controller of the company.
The actual controllers Lin Zhiguo, Lin Qiuying, Lin lilun and Lin Lizhen together directly or indirectly own 76.59% of the shares of the company, which can exert a significant impact on the production and operation of the company. The actual controller of the company has the risk of using its control position to control the company’s development strategy, production and operation decision-making, personnel arrangement, related party transactions, profit distribution and other major matters through the exercise of voting rights and other direct or indirect ways, which will affect the scientificity and rationality of the company’s decision-making, and then damage the interests of the company and other shareholders.
In that case, has Qiaolong Co., Ltd. convened the board of directors and formed a resolution in accordance with the provisions of the articles of association before lending funds? Whether the two parties agree on the loan interest and guarantee means in the loan contract, and how much is the loan interest rate? Is the time when Lin Zhiguo borrowed money from a third party, the time when Qiaolong Co., Ltd. was established and the first capital increase in 2004, the time when Lin Zhiguo signed the loan contract with Qiaolong Co., Ltd. and the time of remittance close? After Lin Zhiguo’s contribution, he lent 9.5 million yuan from the company and did not return it for a long time. Does it constitute withdrawal of contribution?
According to the company’s prospectus, “between 2000 and 2010, Lin Zhiguo and his family successively paid off the debts owed to the company with cash or non cash assets”. Why did they not explain whether they paid off the loan interest and what are the non cash assets used to pay off the debts? In the past, there were problems in early corporate governance. How to solve the problem of improper risk control by actual controllers?
On the above questions, the reporter of Mingjing financial studio of Dazhong Securities News wrote to Qiaolong for emergency response, and no reply has been received as of the time of publication.
The reporter found some answers in the legal opinion of Beijing Deheng Law Firm on the initial public offering of shares and listing on the gem of Fujian Qiaolong emergency equipment Co., Ltd. disclosed by Qiaolong emergency on May 10. Shenzhen stock exchange is also concerned about and asked to explain “the nature of the capital borrowed from Qiaolong Co., Ltd. after Lin Zhiguo’s capital contribution, whether it constitutes capital withdrawal or false capital contribution, whether this behavior complies with the provisions of the company law and whether it constitutes a major violation of laws and regulations; the specific capital source of Lin Zhiguo’s return of the debt related to Qiaolong Limited”.
In this regard, Deheng Law Firm replied that: according to the effective reply of the State Administration for Industry and Commerce on whether the shareholder’s loan belongs to the withdrawal of capital contribution (Gong Shang Qi Zi [2002] No. 180 has expired in 2014): “The company’s loan to shareholders is the embodiment that the company enjoys its property ownership according to law. This relationship between shareholders and the company belongs to the loan relationship. The legal loan relationship is protected by law. The company enjoys corresponding creditor’s rights for the legally lent funds according to law, and the borrowing shareholders bear corresponding debts according to law.
Therefore, in the absence of sufficient evidence, it is recognized that shareholders withdraw their capital contribution only by borrowing from the company, which is lack of legal basis. “
Deheng Law firm believes that Lin Zhiguo’s borrowing from Qiaolong Co., Ltd. is used to repay personal debts and repay the loans one after another, which belongs to the substantive legal relationship of lending, rather than evading capital contribution or false capital contribution, And said: “according to all shareholders of the company (including the shareholders of the sponsors) Confirmation that all shareholders have known the formation of Lin Zhiguo’s above loans, which have been returned to the company in full before the end of 2010, and there is no damage to the rights and interests of the company and shareholders; All shareholders will not hold Lin Zhiguo accountable for the above loan matters; Before the overall change of Qiaolong Co., Ltd. into a joint-stock company, the registered capital of the company has been paid in full, there is no dispute or potential dispute, and there is no case that the shareholders request the court to determine the withdrawal of capital contribution or false capital contribution on the ground of damaging the rights and interests of Qiaolong Co., Ltd. therefore, there is no case of damaging the rights and interests of the shareholders of the company. “
“According to the handling standards of capital withdrawal and other cases in the notice, even if the capital withdrawal cases occurred before March 1, 2014, the newly revised Company Law shall be applied in accordance with the provisions of Article 12 of the criminal law , the promoters of the shareholders of the company shall not be investigated for criminal responsibility for the crime of false capital contribution or withdrawal of capital. Therefore, even if the shareholder Lin Zhiguo’s borrowing from the company constitutes withdrawal of capital contribution, he will not be investigated for criminal responsibility. According to the relevant provisions of the administrative punishment law, if the illegal act is not found within two years, no administrative punishment will be given. It has been more than two years since Lin Zhiguo repaid all the loans to the issuer, and the statutory limitation of administrative punishment has expired. Even if it is recognized as evading capital contribution or false capital contribution, it will not be subject to administrative punishment. “
At the same time, the legal opinion disclosed the specific source of funds for Lin Zhiguo to repay the debts related to Qiaolong Co., Ltd. (see Figure 2). It can be seen that in addition to 3.0681 million yuan being repaid in cash and bills, 5.2433 million yuan is offset by accounts receivable and accounts payable, and 1.1886 million yuan is offset by physical assets.
Figure 2: specific capital sources of Lin Zhiguo’s repayment of relevant debts to Qiaolong Co., Ltd
Then, is the loan of Lin Zhiguo reflected in the financial statements of Qiaolong Co., Ltd. from 2000 to 2010? Why did the loan not be fully paid off for nearly 10 years? Did it constitute the occupation of the company’s funds? Finally, why did the fund occupation fee not be paid? This newspaper will continue to pay attention to other problems existing in Qiaolong emergency.
