Guangyuyuan and Xian Dongsheng Group fail to reach agreement on compensation amount resulting in penalty and allowing shareholders to claim compensation

Radar Finance, produced by Leizhuba, Article | Written by Jianbai | Deep Sea
On June 18th, Guangyuyuan released a progress announcement regarding the performance commitment of the target company of the previous major asset restructuring.
On April 29, 2024, the company issued an announcement on the performance commitment of the target company of the previous major asset restructuring. The company’s progress on the performance commitment of the target company of the previous major asset restructuring is as follows:
Taking into account the performance commitment, compensation agreement, and the correction of the company’s previous accounting errors, the current number of shares held by Xi’an Dongsheng Group, considering the impact of a 10 to 4 deduction, is 3.144 million shares, and the cash amount to be compensated for the insufficient shares is 853.6397 million yuan.
The company issued a notice to Dongsheng Group on May 7, 2024, regarding the cancellation of shares and cash compensation related to the performance commitment, informing Shanxi Guangyuyuan Guoyao Co., Ltd. (hereinafter referred to as “Shanxi Guangyuyuan”) of the actual completion of the performance commitment from 2016 to 2018, the quantity of shares to be compensated, and the cash compensation amount. Dongsheng Group was requested to complete internal decision-making procedures as soon as possible and to fully cooperate with the company to complete the cancellation and compensation of shares and cash, actively fulfilling the commitment, and completing the compensation obligation. For the part of the cash compensation that Dongsheng Group should pay, Dongsheng Group should make the required compensation within 30 working days after receiving the notice letter from the company regarding the cancellation of shares and cash compensation.
According to the results obtained by Xi’an Dongsheng Group and the company through inquiries to China Securities Depository and Clearing Corporation Limited, the shares currently held by Xi’an Dongsheng Group in the company are all pledged or judicially frozen. After confirming with Xi’an Dongsheng Group, the company does not have the objective conditions to repurchase and cancel this part of the shares until the mandatory measures on these shares are lifted. Given the above situation, the company is unable to repurchase and cancel this part of the shares, and the total cash amount to be compensated by Xi’an Dongsheng Group has been adjusted from the original estimate of 85,363.97 million yuan to 93,359.1 million yuan.
In addition, after adjusting the accounting errors from 2016 to 2018, the basis for impairment testing of the assets of Shanxi Guangyuyuan has changed, and it is necessary to re-impair the value of the assets at the end of the performance commitment period. The company has engaged Shanxi Zhongxin Asset Appraisal Co., Ltd. (hereinafter referred to as “Shanxi Zhongxin”) to conduct a retrospective evaluation consultation of the shareholders’ equity of Shanxi Guangyuyuan Guoyao Co., Ltd. as of December 31, 2018.
On May 30, 2024, Shanxi Zhongxin issued Consultation Report No. 052 on the retrospective evaluation of the value of the shareholders’ equity of Shanxi Guangyuyuan Guoyao Co., Ltd. involving the performance compensation for the major asset restructuring of Guangyuyuan Chinese Medicine Co., Ltd., with the conclusion that: the value of the shareholders’ equity of Shanxi Guangyuyuan Guoyao Co., Ltd. after the income method consultation as of the evaluation consultation base date of December 31, 2018 is 217,543.78 million yuan. The assessment result of 40% of the shareholders’ equity of Shanxi Guangyuyuan Guoyao Co., Ltd. is 87,017.51 million yuan.
As of the date of this announcement, the company and Xi’an Dongsheng Group have not reached an agreement on the compensation amount and Dongsheng Group does not have the one-time cash payment capability in the short term, and the payment plan has not yet been formulated. The company will continue to maintain smooth communication with Xi’an Dongsheng Group, urging them to clarify the relevant matters as soon as possible and pay the compensation to the company by June 19. If an agreement cannot be reached or the compensation cannot be received as scheduled, the company will promptly initiate legal recovery procedures, fully safeguard the rights and interests of the company and small and medium investors, and fulfill the obligation of timely disclosure in accordance with relevant rules.
It is worth noting that on April 10, 2024, Guangyuyuan and related parties received the “Administrative Penalty Decision” ([2024] No. 1, No. 2, No. 3, No. 4, No. 5, No. 6, No. 7, No. 8) and “Market Access Decision” ([2024] No. 1) issued by the Shanxi Regulatory Bureau of the China Securities Regulatory Commission.
Based on the facts, nature, circumstances, and social harm of the illegal acts of the parties, in accordance with the provisions of Article 197, Paragraph 2 of the Securities Law, the Shanxi Regulatory Bureau decided to issue a warning to Guangyuyuan and impose a fine of 8 million yuan. Zhang Bin was issued a warning and a fine of 5 million yuan. Fu Shuhong was issued a warning and a fine of 2.5 million yuan. Zhang Zhengzhi was issued a warning and a fine of 2.5 million yuan. Wang Junbo was issued a warning and a fine of 1 million yuan. Yang Hongfei was issued a warning and a fine of 800,000 yuan. Li Zhong was issued a warning and a fine of 800,000 yuan. Zhao Xuanmin was issued a warning and a fine of 500,000 yuan.
In response to this, Lawyer Yu Jun of Sichuan Dingzhong Law Firm told Radar Finance that, according to the Securities Law and related regulations, investors who suffer losses due to the improper conduct of listed companies can claim compensation according to the law. Investors who bought Guangyuyuan stocks between March 21, 2017 and December 28, 2023, and held them until the close of trading on December 28, 2023, can register to participate in the claim. To register, please follow the official account “Leizhuba” (Leizhu code: 66) to participate in the rights protection, and there are no fees before receiving compensation.
Tianyancha shows that Guangyuyuan has participated in 17 bidding projects; there are 2 pieces of patent information in the field of intellectual property; in addition, the company also has 3 administrative licenses.