Hong Kong SFC Suspends Hong Kong-Listed Fruit & Beverage Manufacturer Tianyun International Holdings for Possibility of Fabricating Unauthorized Transfer of $4.7 Million in 2022 & $59 Million to $77 Million of Missing Funds Representing 90% of Cash & Bank Balances Which is Around 45% of Net Asset Value for Last 4 Years
17th April 2024 | Hong Kong
The Hong Kong Securities and Futures Commission (SFC) suspended fruit & beverage manufacturer Hong Kong-listed Tianyun International Holdings for possibility of fabricating unauthorized transfer of $4.7 million (CNY 34 million) in 2022, and $59 million to $77 million (CNY 433 million to CNY 563 million) of missing funds representing 90% of cash & bank balances which is around 45% of net asset value (for last 4 years). Hong Kong SFC: “The SFC’s action stemmed from an investigation into a purported transfer of RMB34 million executed by a Mainland subsidiary of Tianyun in December 2021. In March 2022, PricewaterhouseCoopers (PwC), the then auditors of Tianyun, found irregularities during the annual audit of Tianyun which uncovered a major discrepancy between Tianyun’s internal financial records and its actual bank balance independently obtained by PwC in relation to a bank account maintained by the Mainland subsidiary. Between April and October 2022, Tianyun published various announcements disclosing the matter and the findings of the forensic investigation conducted by its independent forensic accountant (Note 3). Tianyun claimed that the discrepancy was caused by an unauthorised transfer of RMB34 million executed by an executive of the Mainland subsidiary without the knowledge of Tianyun’s senior management. The SFC’s investigation, however, discovered that the purported transfer of RMB34 million had never taken place. This raised serious concerns about whether Tianyun had fabricated the purported transfer of RMB34 million to conceal irregularities identified by its then auditors and to mislead its shareholders, auditors, forensic accountant, and the regulators. To this end, the SFC ascertained the balances of the bank accounts of Tianyun and its other major operating subsidiaries from 31 December 2019 to 30 June 2022 and further discovered other discrepancies between the bank balances provided by Tianyun to the SFC and the balances independently obtained by the SFC from Tianyun’s banks. The amount of missing funds was massive ranging from RMB433.8 million to RMB563.7 million, representing over 90% of Tianyun’s cash and bank balances and over 45% of Tianyun’s net asset value in its published financial results for the past four years (Note 4).” This led the SFC to have serious concerns regarding: (i) the accuracy of the financial information disclosed in Tianyun’s published financial results; (ii) the integrity of Tianyun’s management, including Mr Yang Ziyuan, Mr Sun Xingyu and Mr Sun Lei (Note 5); (iii) the reliability of Tianyun’s internal control and accounting system; and (iv) Tianyun’s ability to safeguard its assets and to keep the market properly informed.”
“ Hong Kong SFC Suspends Hong Kong-Listed Tianyun International Holdings for Possibility of Fabricating Unauthorized Transfer of $4.7 Million in 2022 & $59 Million to $77 Million of Missing Funds Representing 90% of Cash & Bank Balances Which is Around 45% of Net Asset Value for Last 4 Years “
Tianyun International Holdings Limited (stock code of Hong Kong listed company: 6836. HK) – As a leading seller and manufacturer of brand processed fruit products and beverage products in China, we are mainly engaged in (I) production and sales of processed fruit products packaged in metal cans, plastic cups, glass bottles and aluminum foil bags, (II) production and sales of beverage products and (III) trading of fresh fruits. The processed fruit products are sold through the channels of their own brands “Bingguo era”, “Tiantong era” and “guoxiaolao” as well as OEM sales entrusted by the original factory. Beverage products are sold under the brand of “xiangpai shiok party”. The group is committed to providing customers with health and safety products. In recent years, with the rise of health awareness of Chinese consumers and the enhancement of consumption power, the group’s own brand business has become the locomotive of performance growth, and the proportion of revenue has also been rising.
Hong Kong SFC Suspends Hong Kong-Listed Tianyun International Holdings for Possibility of Fabricating Unauthorized Transfer of $4.7 Million in 2022 & $59 Million to $77 Million of Missing Funds Representing 90% of Cash & Bank Balances Which is Around 45% of Net Asset Value for Last 4 Years
15th April 2024 – The Securities and Futures Commission (SFC) has directed The Stock Exchange of Hong Kong Limited (SEHK) to suspend dealings in the shares of Tianyun International Holdings Limited (Tianyun) under the Securities and Futures (Stock Market Listing) Rules (SMLR) with effect from 9:00 am on 15 April 2024 (Notes 1 and 2).
- The SFC’s action stemmed from an investigation into a purported transfer of RMB34 million executed by a Mainland subsidiary of Tianyun in December 2021. In March 2022, PricewaterhouseCoopers (PwC), the then auditors of Tianyun, found irregularities during the annual audit of Tianyun which uncovered a major discrepancy between Tianyun’s internal financial records and its actual bank balance independently obtained by PwC in relation to a bank account maintained by the Mainland subsidiary. Between April and October 2022, Tianyun published various announcements disclosing the matter and the findings of the forensic investigation conducted by its independent forensic accountant (Note 3). Tianyun claimed that the discrepancy was caused by an unauthorised transfer of RMB34 million executed by an executive of the Mainland subsidiary without the knowledge of Tianyun’s senior management.
- The SFC’s investigation, however, discovered that the purported transfer of RMB34 million had never taken place. This raised serious concerns about whether Tianyun had fabricated the purported transfer of RMB34 million to conceal irregularities identified by its then auditors and to mislead its shareholders, auditors, forensic accountant, and the regulators.
- To this end, the SFC ascertained the balances of the bank accounts of Tianyun and its other major operating subsidiaries from 31 December 2019 to 30 June 2022 and further discovered other discrepancies between the bank balances provided by Tianyun to the SFC and the balances independently obtained by the SFC from Tianyun’s banks. The amount of missing funds was massive ranging from RMB433.8 million to RMB563.7 million, representing over 90% of Tianyun’s cash and bank balances and over 45% of Tianyun’s net asset value in its published financial results for the past four years (Note 4).
- This led the SFC to have serious concerns regarding: (i) the accuracy of the financial information disclosed in Tianyun’s published financial results; (ii) the integrity of Tianyun’s management, including Mr Yang Ziyuan, Mr Sun Xingyu and Mr Sun Lei (Note 5); (iii) the reliability of Tianyun’s internal control and accounting system; and (iv) Tianyun’s ability to safeguard its assets and to keep the market properly informed.
- To protect shareholders’ interest, the SFC required Tianyun to address our concerns by taking various immediate actions. These included: (i) suspending the duties of implicated parties; (ii) undertaking to engage reputable independent consultants to investigate the matters and conduct an internal control review; (iii) undertaking to ensure the integrity of Tianyun’s management by reconstituting its board of directors, taking into account the SFC’s concerns and the findings of the investigation to be conducted by an independent consultant; (iv) engaging an independent manager to implement additional control procedures to safeguard Tianyun’s assets; (v) taking interim measures to safeguard assets pending the engagement of an independent manager; and (vi) issuing an announcement to disclose to shareholders details of the SFC’s concerns and steps taken by Tianyun to address the SFC’s concerns.
- As Tianyun had failed to address the SFC’s concerns satisfactorily, in particular, its failure to provide the required undertakings to our satisfaction and engage a reputable independent manager in Hong Kong to safeguard Tianyun’s assets, the SFC issued a notice to the SEHK on 12 April 2024 to direct it to suspend dealings in Tianyun’s shares.
- The SFC considers that suspending dealings in Tianyun’s shares is desirable for the purpose of maintaining a fair and orderly market and protecting the interest of the investing public.
The SFC’s investigation is ongoing.
Notes:
- Tianyun has been listed on the Main Board of the SEHK since 7 July 2015.
- Under section 8(1) of the SMLR, the SFC has the power to direct the SEHK to suspend dealings in shares of a listed company where:
- any materially false, incomplete or misleading information has been included in any document issued in connection with a listing of securities or in announcement, statement, circular or other document made or issued by it or on its behalf;
- it is necessary or expedient in the interest of maintaining an orderly and fair market in securities traded on the SEHK;
- it is in the interest of the investing public or in the public interest, or it is appropriate for the protection of investors generally or for the protection of investors in the shares of the listed company; or
- there has been a failure to comply with any condition imposed by the board of the SFC when permitting resumption of trading under section 9(3)(c) of the SMLR.
- Tianyun’s announcements published on 10 April 2022, 16 May 2022, 29 July 2022 and 3 October 2022.
- Tianyun’s published financial results for its financial years ended 31 December 2019, 2020, 2021 and for the six months ended 30 June 2022.
- Mr Yang Ziyuan is Tianyun’s chairman, chief executive officer and executive director. Mr Sun Xingyu is an executive director of Tianyun. Mr Sun Lei is the financial controller responsible for the overall financial matters of Tianyun in Mainland China. Based on Tianyun’s announcement dated 27 March 2024, the Board of Tianyun has resolved to suspend all duties and powers of Mr Yang Ziyuan, Mr Sun Xingyu and Mr Sun Lei as its senior management with effect from 26 March 2024.
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