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Zhang Xiaohui, reporter of Economic Observer Tu Jianhua, the former "motorcycle gang boss", has become a dishonest debtor.

Tu Jianhua, born in 1963, founded the Loncin Group in Chongqing, a city known for its motorcycle gangs. He was once the chairman of the Chongqing Federation of Industry and Commerce, a member of the Chongqing Municipal People's Congress, and a national outstanding entrepreneur. Now, Tu Jianhua is in debt and may lose his position as chairman and general manager of Loncin General Power Co., Ltd. (603766.SH, hereinafter referred to as "Loncin General").

The thirteen Loncin companies once controlled by Tu Jianhua are currently in the difficult process of bankruptcy reorganization.

A former senior executive of Loncin General lamented to Economic Observer: The three-foot-thick ice did not form overnight!

Chongqing Securities Regulatory Bureau ordered Loncin General to replace its chairman

On August 3, 2024, Loncin General Power issued an announcement stating that the company received the "Decision on Taking Corrective Measures against Loncin General Power Co., Ltd." (No. [2024] 21, hereinafter referred to as the "Decision") issued by the Chongqing Regulatory Bureau of the China Securities Regulatory Commission (hereinafter referred to as the "Chongqing Securities Regulatory Bureau") on August 2.

The "Decision" shows that the fourth board of directors of Loncin General has expired in January 2023 and has not yet been replaced. The company's current chairman and general manager Tu Jianhua has been listed as a dishonest person subject to enforcement by many people's courts due to his large personal debts that have not been repaid when due, which constitutes the situation of being unable to serve as a director or senior manager of the company as stipulated in Article 178, paragraph 1, item (5) of the "Company Law", and violates Article 25 of the "Corporate Governance Guidelines for Listed Companies".

Chongqing Securities Regulatory Bureau requires Loncin General to disclose the "Decision" within 2 trading days after receiving the "Decision", and to hold a board of directors election and replace the chairman and general manager. The rectification report must be disclosed and submitted to the bureau within 30 days from the date of receipt of the "Decision". The rectification report must be signed and confirmed by all directors and stamped with the company seal.

Economic Observer searched the China Enforcement Information Disclosure Network and found that Tu Jianhua had multiple information on dishonest debtors. One of them was a debt litigation case in 2022. The amount of execution against Tu Jianhua was as high as 863 million yuan. The judgment of the Chongqing No. 1 Intermediate People's Court came into effect. Tu Jianhua has not yet fulfilled the repayment, and has not repaid the 970,000 yuan litigation fee ordered by the court.

On the afternoon of August 3, Economic Observer called the office of Loncin General's secretary to try to inquire about relevant matters, but no one answered the call.

As of now, Tu Jianhua is still the actual controller, chairman and general manager of Loncin General.

In its 2023 annual report, Loncin General explained that as of now, the bankruptcy reorganization of 13 Loncin companies is still in progress, and the equity of Loncin General held by Loncin Holdings Co., Ltd. (hereinafter referred to as "Loncin Holdings") has not yet been delivered. The company's controlling shareholder is still Loncin Holdings, and the company's actual controller is still Tu Jianhua.

If the reorganization plan is implemented, the controlling shareholder and actual controller of Loncin General will change. If it is not implemented within the ruling time, its controlling shareholder will be at risk of being declared bankrupt. There is still uncertainty as to whether the bankruptcy reorganization of the 13 Loncin companies will be successful.

New restructuring investors: Zuo Zongshen and ChongqingcitySASAC

As early as 2021, Tu Jianhua was unable to save himself due to his debt crisis and had to apply to the court for bankruptcy reorganization.

In January 2022, the Fifth Intermediate People's Court of Chongqing (hereinafter referred to as "Chongqing Fifth Intermediate Court") accepted the bankruptcy reorganization cases of 13 Loncin companies. The list of these 13 companies is: Loncin Group Co., Ltd., Loncin Holdings Co., Ltd., Chongqing Loncin Investment Co., Ltd., Chongqing Lianen Industrial Co., Ltd., Chongqing Longheng Hotel Co., Ltd., Chongqing Yushang Industrial Investment Co., Ltd., Chongqing Loncin Mining Investment Co., Ltd., Chongqing Yuhan Real Estate Development Co., Ltd., Weinan Hongjing Trading Co., Ltd., Chongqing Yushang Renewable Resources Development Co., Ltd., Chongqing Changjiang Financial Holding Group Co., Ltd., Yushang Investment Group Co., Ltd., Chongqing Yingchuan Industrial Co., Ltd. (collectively referred to as: 13 Loncin companies) They are all actually controlled by Tu Jianhua.

The reorganization plan of the 13 Loncin Group companies was originally intended to be completed within 12 months, but was later postponed several times. On May 20, 2024, the Chongqing Fifth Intermediate People's Court made a civil ruling: agreeing to extend the implementation period of the reorganization plan of the 13 Loncin Group companies by three months (until August 21, 2024).

As the deadline approaches, July 2024, the bankruptcy reorganization has accelerated.

Zuo Zongshen, another big boss of the Chongqing motorcycle gang, and the Chongqing State-owned Assets Supervision and Administration Commission, as restructuring investors, entered the restructuring plan of the 13 Loncin companies.

On July 1, 2024, the reorganization administrators (hereinafter referred to as "administrators") of the 13 companies of the Loncin Group were jointly appointed by two law firms designated by the Chongqing Fifth Intermediate People's Court, namely Beijing Longan Law Firm and Beijing Dacheng (Shanghai) Law Firm. The administrators signed the Reorganization Investment Agreement with Chongqing Zongshen New Intelligent Manufacturing Technology Co., Ltd. (hereinafter referred to as "Zongshen New Intelligent Manufacturing", Zuo Zongshen is the actual controller). According to the agreement, Zongshen New Intelligent Manufacturing paid a total of 3.346 billion yuan in reorganization investment funds and acquired 504 million shares of Loncin General held by Loncin Holdings, accounting for 24.55% of the total share capital of Loncin General.

On July 11, 2024, 13 Loncin companies, the administrator and Chongqing Yufu Capital Operation Group Co., Ltd. (hereinafter referred to as "Yufu Capital", the actual controller is the Chongqing State-owned Assets Supervision and Administration Commission) signed the "Restructuring Investment Agreement". According to the agreement, Yufu Capital will pay a total amount of 2.115 billion yuan and will acquire 319 million shares of Loncin General held by Loncin Holdings, accounting for 15.52% of the total share capital of Loncin General.

As of August 1, the reorganization administrator accounts of the 13 Loncin Group companies had received the first installments of reorganization investment paid by reorganization investors Zongshen New Intelligent Manufacturing and Yufu Capital, which were 673 million yuan and 423 million yuan, respectively.

This means that Zongshen New Intelligence and Yufu Capital will become the largest and second largest shareholders of Loncin General. Zuo Zongshen may replace Tu Jianhua and become the new actual controller of Loncin General.

Tu JianhuaDisapproval of the restructuring plan

Seeing that the equity of Loncin General, a core asset under his control, was about to be transferred, Tu Jianhua expressed dissatisfaction with the administrator's approach. He believed that such a restructuring plan should be declared invalid.

On July 28, 2024, Tu Jianhua, as the executive director of Qihe Environmental Protection (00976.HK), sent a letter to Qihe Environmental Protection stating that the administrator had not obtained legal authorization and had used the official seals of the thirteen companies in his custody without the resolution of the actual controllers and the board of directors of the thirteen companies of the Loncin Group. He signed the "Restructuring Investment Agreement" with investors on behalf of the thirteen companies of the Loncin Group without legal procedures, which violated the mandatory provisions of the "Bankruptcy Law" on the disposal of property by the administrator. The "Restructuring Investment Agreement" should be invalid.

In the letter, Tu Jianhua stated that he had filed a lawsuit for invalidation of the agreement signed between the administrator and Zongshen Company (referring to Zongshen New Intelligent Manufacturing) with the Chongqing No. 5 Intermediate People's Court on July 16, 2024. The main reason was that the administrator did not obtain legal authorization and signed the "Restructuring Investment Agreement" without authorization, which violated the mandatory provisions of the "Bankruptcy Law" on the disposal of property by the administrator, and that Zongshen Company and Loncin General had serious problems of intra-industry competition and concentration of operators, and the "Restructuring Investment Agreement" had not passed any review and approval procedures.

In addition, Tu Jianhua stated in the letter that the Chongqing No. 5 Intermediate People's Court had recently verbally informed him that it would refuse to accept the case, and he would appeal to the higher court through his representative lawyer.

Tu Jianhua's statement in the letter means that he does not approve of the current restructuring plan of the 13 Loncin companies.

On August 5, Loncin General’s stock price plummeted, closing at 6.53 yuan, a drop of 3.97%, with a total market value of approximately 13.4 billion yuan.

Copyright Statement: The above content is the original work of the Economic Observer, and the copyright belongs to the Economic Observer. Reprinting or mirroring is strictly prohibited without the authorization of the Economic Observer, otherwise the legal liability of the relevant behavior subject will be pursued in accordance with the law. For copyright cooperation, please call: [010-60910566-1260].

Zhang Xiaohui, reporter of Economic Observer

Capital Markets Reporter
He has been engaged in the news industry for more than 12 years, focusing on current affairs and corporate news reporting, and is good at interviewing, investigating, collecting evidence and making breakthroughs. He has worked in the East China News Center (Shanghai) of the Economic Observer since 2006, and was stationed in Chongqing in 2008, responsible for news reporting in the southwest region. He is based in Chongqing.