According to the Financial Association on November 29 (Reporter Zhang Chenjing), due to multiple violations such as failure to disclose related trades, hindering independent directors from exercising their powers, and undisclosed capital transfers amounting to over 100 million, fortune ng fung food (600965.SH) was subjected to administrative supervision measures by the china Securities Regulatory Commission hebei Regulatory Bureau (hereinafter referred to as "hebei Securities Regulatory Bureau") at the end of October. In today's report of corrections and re-examinations released by the company, it stated that there was a misunderstanding of relevant policies regarding the hindrance of independent directors, which led to a failure to timely sign contracts with the reviewing bodies, resulting in the delayed completion of the review work.

Misunderstanding of policies and failure to timely sign contracts?

This evening, fortune ng fung food announced that the review report for the cattle farm, which previously had inconsistencies between actual construction and completion settlement, has been completed, with a total reduction amount of 42.4761 million yuan.

Specifically, according to the re-examination report issued by hebei Litiang Engineering Project Management Co., Ltd., hebei Litiang Audit Document [2024] No. 3006, the construction projects of Xinglongzhuang cattle farm (East and West districts), Liujiache cattle farm, and Xiwutang cattle farm (North and South districts) have a submitted settlement amount of 0.509 billion yuan after deducting supplied materials and machinery. The total additional audit amount for the second re-examination is 5.6135 million yuan, and the reduction amount is 48.0897 million yuan (of which the reduction amount for engineering quantity is 27.6861 million yuan, and the reduction amount for using old projects is 20.4035 million yuan), with the total reduction amount being 42.4761 million yuan.

This issue also dates back to July of this year, when the company was ordered to make corrections and issued a warning letter by the hebei Securities Regulatory Bureau, and was also given a regulatory warning by the Shanghai Stock Exchange.

On July 2, the hebei Securities Regulatory Bureau issued a letter of concern to the company, requiring it to cooperate with independent directors to promptly research and determine a third-party intermediary institution with judicial recognition qualifications to conduct a re-examination of the company's cattle farm construction projects due to inconsistencies between the actual construction and completion settlement of the cattle farms in 2022 and 2023.

On July 17, the company's independent directors held a special meeting to determine the re-examination institution and informed the company's management, requiring the company to cooperate in signing contracts and expedite the re-examination work. However, fortune ng fung food refused to sign an agreement with the re-examination institution and hindered independent directors from exercising their powers.

It is worth mentioning that in today's review report, the company responded for the first time to the lack of a signed agreement with the review agency. The report shows: "On July 17, 2024, the company's independent directors held a special meeting of independent directors for the fourth time in 2024, and after processes such as invitation, selection, and review, proposed to hire Hebei Litian Engineering Project Management Co., Ltd. as the review unit. Due to the company's misunderstanding of related policies, there was a failure to timely sign a contract with the review unit, resulting in the failure to complete the review work on time."

Frequent internal control issues.

Along with the review report disclosed today, there is also a rectification report regarding the "Administrative Supervision Measures Decision Letter" from the Hebei Regulatory Bureau of the China Securities Regulatory Commission. In addition to the above-mentioned situations, the company has previously had multiple instances of violations in disclosure.

The company also failed to perform review procedures and timely disclose related transactions with 10 cooperatives occurring in the 2024 fiscal year. According to its supplementary related transaction announcement, from January to October 2024, the trading performance of the beef cattle purchases and sales with the 10 cooperatives of Fortune Ng Fung Food has exceeded 30 million yuan.

In April last year, the board of directors of Fortune Ng Fung Food approved the construction contract for the Liujiadia Cattle Farm project, with a project budget of 0.188 billion yuan, and the contractor was Chengde Hongyuan Construction Group. In May, after Fortune Ng Fung Food paid 17 million yuan in construction fees to Chengde Hongyuan Construction Group, the contractor was changed to Sanhe Hongsheng Construction Co., Ltd., with a contract amount of 0.1647 billion yuan, but Fortune Ng Fung Food did not timely disclose the change of contractor.

The company stated that it will strictly adhere to and implement the various rules and requirements for information disclosure, strengthen internal control construction, improve construction operation process rules and compliance systems for major matter changes, and strictly adhere to major project change procedures in similar construction processes in the future, disclosing information in a timely manner.

It should be noted that the company has been pointed out by regulators more than once. In 2022, there was an incident where the financial director refused to sign the annual report due to the intervention of major shareholders in the company's management.

Fortune Ng Fung Food is a typical family enterprise, with the legal representative and chairman Li Liang being the grandson of founder Li Fucheng. The main business activities include ecological agriculture, beef cattle breeding and farming, food processing and manufacturing, dining services, and funeral services.

In fact, many investors are also quite concerned about the company's internal control issues, and it is common to see questions like "In the board of directors, are there any non-independent directors representing minority shareholders? How is the company's related trade controlled? Who is currently leading the related trade approval?" and "What is the reason for changing the construction party during the company's cattle farm construction process? How is the additional expenditure of 17 million yuan handled? Does the management team led by Li Liang have relevant operational experience? Will they take responsibility for this?" on its interactive platform.

At the same time, the company's performance is also disappointing, with a revenue of 0.708 billion yuan for the first three quarters, a year-on-year decrease of 15.47%; and a net income of 28.9371 million yuan, a year-on-year decrease of 78.76%.