Now that there are 30 days left before the “delisting” deadline, the company has begun to take countermeasures one after another.
view network China Evergrande has suspended trading since March 21, 2021. According to relevant regulations, if it fails to resume trading before September 21, 2023, it will enter the delisting process. Now that there are 30 days left before the “delisting” deadline, the company has begun to take countermeasures one after another.
On the evening of August 21, China Evergrande disclosed an announcement of the main results of the internal control assessment and the review of certain issues raised by the former auditor. The main purpose is to complete the additional resumption guidelines issued by the Hong Kong Stock Exchange.
This stems from the fact that on August 30 last year, China Evergrande received additional resumption guidelines from the Stock Exchange, specifically including the integrity of the management and/or the integrity of anyone who has a significant impact on the company’s management and operations, which may have negative impact on investors. poses a risk and undermines confidence in the market, it needs to be demonstrated that there are no reasonable regulatory concerns;
At the same time, an independent internal control review is required to prove that the company has established sufficient internal control and procedures to fulfill its responsibilities under the listing rules.
Viewpoint New Media understands that, in addition, China Evergrande’s latest announcement also echoes the issues raised by PricewaterhouseCoopers when it resigned as the company’s auditor.
On January 16 this year, PricewaterhouseCoopers stated in its resignation letter that it had not received some information on major matters related to Evergrande’s 2021 consolidated statements, involving a total of 9 aspects. These include Evergrande and Evergrande Auto’s possible existence of “off-balance-sheet wealth management products and other off-balance-sheet liabilities”, the final investigation report on the transfer of 13.4 billion yuan in deposits from Evergrande Property, and loans that were not repaid on the contractual maturity date at the end of the period. and other interest-bearing liabilities.
China Evergrande stated in the latest announcement that the company appointed Luo Shenmei Consulting Co., Ltd. to review the internal control and procedures of the additional resumption guidelines, and appointed Crowe Horwath (Hong Kong) Risk Management Co., Ltd. to review certain issues raised by the former auditors. Issues are reviewed.
Specifically, Luo Shenmei said that she has completed the relevant internal control review work, and presented the main internal control deficiencies found and proposed rectification suggestions in three aspects: the internal monitoring environment of the enterprise, financial reporting and information disclosure, and process-level control.
Among them, Luo Shenmei mentioned that Evergrande’s capital center will organize monthly meetings with the capital department and marketing brand department of regional companies to discuss the expected new financing plan and mortgage payment in the next month, but the company has not made any plans for liquidity. Money management has a written policy. The agency suggested that Evergrande should formulate relevant management measures to clarify the requirements for liquidity forecasting and the approval process.
However, Evergrande responded that before the company had capital liquidity problems, the financial center and capital center would coordinate the regions to prepare a cash flow balance forecast table on a weekly/monthly basis. The comprehensive management center counts and manages, and jointly follows up the implementation of the plan. At present, the funds of companies in various regions are generally co-managed and coordinated by the government, and they will fully cooperate with the related work of Baojiao Building.
“The Group will formulate the “Evergrande Group Cash Flow Budget and Execution Management Measures” as suggested, and require regional companies and subsidiaries to formulate the “Annual Cash Flow Forecast Form” every year and report it to the financial center and capital center to form the “Annual Cash Flow Forecast summary table”. The summary table needs to be reviewed by the executive president of the group, and then submitted to the board of directors for deliberation and decision-making.”
In contrast, Crowe Horwath’s review of Evergrande’s potential off-balance sheet liabilities and pledge guarantees pointed out by PricewaterhouseCoopers is more sharp and skinny.
Among them, China Fortune Horwath stated on the issue of pledge guarantees that the occurrence of these incidents highlights the problems existing in Evergrande’s internal monitoring, including insufficient compliance awareness in compliance monitoring, and the failure to establish an effective monitoring and regular reporting mechanism; , due to employees’ obedience and reliance on the person in charge of the project, they did not exercise independent judgment on the purpose and reasons of the transaction and did not provide good faith consultation; and seal management, did not properly separate from the seal storage place and seal approval system of Evergrande Property .
Regarding potential off-balance sheet liabilities, Crowe Horwath found that the off-balance sheet wealth management products referred to by PricewaterhouseCoopers should be wealth management products related to Evergrande Wealth, which issued targeted financing products through third-party issuers. In August 2021, due to difficulties in payment, Dingrong products have completely stopped external sales, but a total of about 92.1 billion yuan has been raised.
Since China Evergrande is the guarantor of the above-mentioned Dingrong products, its two subsidiaries provide full and unconditional obligations to make up the difference for the part of Dingrong products that has not been paid in full on schedule. As of the end of 2021 and the end of 2022, the outstanding principal and interest will be 41 billion yuan and 34 billion yuan respectively; in 2022, the amount of litigation involving Dingrong products will be about 500 million yuan.
In terms of potential undisclosed deposit pledge arrangements, Crowe Horwath discovered that Evergrande had two deposit pledge guarantee arrangements in March and April 2021, involving a total of 5.31 billion yuan. The relevant deposit certificate pledge guarantee has been released before the end of 2021.
China Evergrande stated that, regarding the above test results, the group has established procedures for the use of seals and contract approval, seal registration and seal maintenance in relevant processes, and no major deficiencies in the management system have been found.
However, Evergrande mentioned that during the investigation, three aspects of internal control related to the allegations were found to be improved.
Among them, Evergrande confirmed that there will be a large number of resignations from August 2021 to March 2022, and the files “failed to be properly preserved” after multiple handovers, “resulting in the failure to provide sampling contracts and deposits on time and completely. Pledge related documents”.
The loss of personnel also caused another problem, that is, in addition to not properly keeping the printed approval form, part of the printed application in the printed record was “due to the ‘special work of the company’ and other circumstances, the printed approval form was not kept.”
In addition, due to the fact that currently only the manual account is used to register the use of seals, contracts cannot be systematically classified, screened and linked to the approval records of use of seals. Evergrande said, “This is not conducive to effectively tracking the department that initiated the use of seals and the status of approval of seals or contracts. “.
This reflects that Evergrande’s monitoring system and processes at the internal control level have obvious flaws and urgently need to be improved. However, the company’s board of directors expressed a positive opinion, believing that after considering the internal control assessment report and the recommendations of Luo Shenmei and Crowe Horwath, the corrective measures implemented by the group member companies are “sufficient to solve all the major problems found in the internal control system and process”.
In any case, the disclosure of the internal control assessment report represents China Evergrande’s actual actions to meet the additional resumption requirements. Prior to this, the company also disclosed unannounced financial results, and announced the results of the investigation and remedial measures against the implementation of the 13.4 billion pledge guarantee of Evergrande Property.
According to the resumption guidelines received on June 15 last year, China Evergrande also needs to prove that the company complies with Rule 13.24 of the Listing Rules, and inform the market of all important information so that the company’s shareholders and other investors can evaluate the company’s situation.
Rule 13.24 of the Listing Rules may be Evergrande’s biggest resistance at present. The former requires that the issuer’s business “must have sufficient business operations and have assets of considerable value to support its operations before its securities can continue to be listed.” As of the end of 2022, Evergrande’s total liabilities are 2.44 trillion yuan, and its net assets are -599.074 billion yuan. On the surface, it is already at an unfavorable level of insolvency.
Therefore, whether Evergrande can resume trading in the last 30 days is still a mystery.
2023-08-21 16:54:25
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