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on september 6, huaxing capital (01911.hk), which had been suspended for more than 17 months, announced that ms. hui yin ching, the wife of controlling shareholder bao fan, was appointed as a non-executive director, and sun qianhong resigned as a non-executive director, both effective from that day.

at the same time as the personnel changes, china renaissance capital also recently announced that it has met all the requirements of the hong kong stock exchange's resumption of trading guidelines and applied to resume trading on september 9. however, judging from the latest disclosed financial report, china renaissance capital has suffered losses for several consecutive reporting periods, and its stock price may face certain pressure after the resumption of trading.

it is worth noting that from the latest disclosed information, the aftermath of bao fan's disappearance is still not over. according to the financial report, in the fourth quarter of 2023, huaxing capital needs to pay 77.669 million yuan of restricted funds due to bao fan's cooperation in the investigation. the accounting treatment of this amount has aroused the attention of the auditors, and finally issued a qualified opinion on huaxing capital's 2023 annual report.

bao fan's wife xu yanqing becomes director

according to huaxing capital's disclosure, cr partners limited, the controlling shareholder holding approximately 38.38% of the company's issued shares, requested the appointment of xu yanqing as a non-executive director, effective september 6, for a term of three years.

according to the previous prospectus, cr partners limited is held by bao fan, xie yijing, du yongbo and wang xinwei. among them, bao fan is the former chairman of the board of directors of huaxing capital, and xie yijing is the current chairman of the board of directors.

public information shows that xu yanqing also indirectly held shares in the company in 2018. cr partners limited is 73.37% owned by fbh partners. bao fan and xu yanqing hold 79% and 21% of fbh partners respectively.

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(image source: 2018 huaxing capital prospectus)

xu yanqing and bao fan, the controlling shareholder of huaxing capital, are married. according to the announcement, as of early september, bao fan held a total of 277 million shares in huaxing capital, accounting for 48.71% of the total issued shares. according to the securities and futures ordinance, xu yanqing is also deemed to own the above-mentioned shares.

in fact, xu yanqing himself has a rich career experience. it is reported that xu yanqing is the founder, chairman and ceo of china airlines aviation technology (tianjin) co., ltd. china airlines aviation technology co., ltd. provides global business jet leasing business and is committed to serving high-end customers with internet solutions.

in addition, in 2017, xu yanqing and the china social welfare fund association jointly established a public welfare project aimed at funding children with limb disabilities.

huaxing capital emphasized that xu yanqing had not previously participated in huaxing capital's business and confirmed that she had not received any investigation notice or court lawsuit regarding bao fan's cooperation in the investigation. the board of directors and the nomination committee unanimously agreed that the incident would not adversely affect her appointment as a non-executive director.

it is worth noting that at the beginning of the year, huaxing capital had a round of high-level personnel adjustments, and bao fan had resigned from many positions. on february 2, huaxing capital announced that bao fan had resigned from the company's executive director, chairman of the board and other positions due to health reasons and the desire to spend more time on family affairs. xie yijing was appointed chairman of the board.

china renaissance capital to resume trading soon

at the same time as the personnel changes, china renaissance capital, which has been suspended for more than 17 months, is about to resume trading. on september 6, china renaissance capital announced that it had met all the requirements of the hong kong stock exchange's resumption of trading guidelines and had applied to the hong kong stock exchange for the group's shares to resume trading on september 9, 2024.

according to public information, huaxing capital was founded in 2005. it initially focused on financing consulting, and later expanded its business to mergers and acquisitions, ipo underwriting, wealth management, etc. it has a great influence in the domestic venture capital circle. it has served internet giants such as jd.com, 360, iqiyi, and momo.

the suspension began in april last year. according to the announcement, huaxing capital decided to delay the publication of its 2022 annual results because the auditor was unable to issue an audit report, and suspended trading from april 3 of that year until the release of its 2022 annual results. before the suspension, the company's share price was hk$7.27 per share, with a market value of hk$4.132 billion.

the auditors were unable to issue the audit report mainly because bao fan lost contact. huaxing capital stated in the announcement that the auditors could not complete the audit work and issue the audit report before they were able to contact bao fan and understand the matters disclosed in the announcement.

huaxing capital said at the time that bao fan was cooperating with the investigation of relevant authorities. some media reports pointed out that this matter may be related to the illegal operation of cong lin, the former chairman of huaxing securities, a subsidiary of huaxing capital, in the ship leasing business. however, huaxing capital did not respond to this.

judging from the latest financial reports, huaxing capital has suffered losses for several consecutive reporting periods, and the stock price pressure after resumption of trading may be relatively large.

in the first half of this year, huaxing capital holdings achieved total revenue and net investment income of approximately rmb 360 million, compared with rmb 584 million in the same period last year; profit attributable to shareholders was rmb -0.74 billion, compared with rmb -1.8 billion in the same period last year.

looking at the long-term trend, the company's total revenue and net investment income will be 1.585 billion yuan and 1.006 billion yuan in 2022 and 2023, respectively, down 9.12% and 36.54% year-on-year. the profit attributable to shareholders will be -430 million yuan and -471 million yuan, respectively.

the company's headcount has also been significantly reduced. as of the end of the first half of fiscal year 2024, huaxing capital had 521 employees, a decrease of 8% from the end of 2023.

in its first-half financial report this year, china renaissance explained that the number of ipos and financing amounts in the overseas chinese concept stock market have declined significantly, and the participation of market-oriented investors is extremely low. transactions in the private equity financing advisory market are also in line with the sluggish trend in the investment and financing market.

bao fan cooperates with the investigation, and the aftermath of the incident is still not over

several financial reports and announcements reissued by huaxing capital before resuming trading also revealed the latest progress of bao fan's cooperation with the investigation. huaxing capital is still affected by the incident to some extent.

the 2023 financial report shows that huaxing capital received a notice from the relevant department in the fourth quarter of 2023 that bao fan needed to pay a restricted amount of rmb 77.669 million in order to cooperate with the investigation. the company included this amount in "other receivables" in the 2023 fiscal year.

the accounting treatment of this amount aroused the concern of the auditor. due to the lack of sufficient and appropriate audit evidence, the auditor ultimately issued a qualified opinion on huaxing capital's 2023 annual report.

in this regard, china renaissance explained that the company was not aware of and had no reliable information on the status of any investigation that bao fan was cooperating with. to date, china renaissance has not received any notice that it is under investigation, nor has it entered into any court proceedings related to such events. therefore, such audit reservations may only be removed after the status or results of the restricted funds and bao fan's cooperation with the investigation become clearer, or the auditor can obtain other appropriate evidence.

(photo source: company announcement)

in addition, huaxing capital's asset management business also faces challenges. the company said in its financial report that due to bao fan's cooperation in the investigation, the fundraising of huaxing new economy rmb phase iv fund and us dollar phase iv fund (referred to as "huaxing new economy phase iv fund") ended ahead of schedule, and the investment period was also terminated ahead of schedule.

therefore, huaxing capital has conducted comprehensive negotiations with huaxing new economy fund iv on the recovery of outstanding investment amounts and accrued interest. according to the announcement released by huaxing capital on march 11 this year, the company signed a settlement agreement with huaxing new economy fund iv. huaxing capital agreed to accept the transfer of all interests in the special purpose company for approximately rmb 791 million, and the special purpose company holds the relevant investment portfolio interests of huaxing new economy rmb fund iv. huaxing new economy fund iv is required to use the funds to fully repay the outstanding investment amount of the same amount. after repaying the outstanding investment amount, huaxing new economy fund iv will not be required to pay the interest accrued and unpaid to huaxing capital (approximately rmb 117 million as of june 30, 2023). the settlement was completed in july 2024.

(photo source: company announcement)