Versions

 

4 December 2019

Shenzhou Space Park Group Limited – Decision of the Listing Review Committee
 
On 27 November 2019, the Listing Review Committee heard an application by Shenzhou Space Park Group Limited (the Company) for a review of the decision of the Listing Committee, set out in a letter dated 9 August 2019, cancelling the Company’s listing on the Main Board.
 
Having carefully considered all the facts and evidence, and all the submissions presented by the Company and the Listing Department, the Listing Review Committee decided that the Company’s listing should be cancelled under Rule 6.01A.
 
We set out below the Listing Review Committee’s reasons for its decision. Please note that this necessarily represents only a summary of the Listing Review Committee’s analysis, and does not purport to set out exhaustively the facts or address all of the arguments presented.
 
1. The Company’s business involved trading of household furniture and wooden products, and mining of iron and titanium ores. It has been listed on the Main Board since January 2000, although trading in the Company’s shares has been suspended since 22 June 2017. At that time, the Company was known as China Household Holdings Limited.
 
2. The trading suspension arose following the Company’s failure to publish an announcement to address allegations in research reports published by Blazing Research. These reports contained allegations that, amongst other things, the Company had exaggerated financial data including its revenue and profit.
 
3. In July 2017, the Securities and Futures Commission directed a suspension under section 8(1) of the Securities and Futures (Stock Market Listing) Rules, as a result of suspected irregularities in the Company’s 2013 interim and annual reports.
 
4. The Company formed an independent board committee (IBC) to investigate the Blazing Research allegations and the suspected irregularities described above. The IBC engaged Zhonghui Anda Risk Services Limited to conduct the investigation.
 
5. In September 2017, certain conditions were imposed on the Company that had to be met to the satisfaction of the Listing Department before the Company could resume trading. Amongst other things, these included requirements that the Company should:
 
  (a)    conduct an appropriate investigation into the allegations in the research report;
 
  (b) publish all outstanding financial results and address any audit qualifications; and
 
  (c) demonstrate that there is no reasonable regulatory concern about management integrity.
 
6. The Company also engaged Zhonghui Anda CPA Limited to perform an internal control review.
 
7. In the second half of 2018, the Company provided the Listing Department with draft or preliminary reports in respect of the internal control review and the investigation. These reports respectively noted control weaknesses and inconsistent financial ledger information.
 
8. By August 2019, the Company had not provided any further information in respect of any measures to rectify its internal control weaknesses, or its investigation into the financial information. The Company had, however, asked for additional time (first to 31 December 2019 and, when that was rejected by the Listing Department, to 31 October 2019) to meet the resumption conditions.
 
Applicable Listing Rules and guidance
 
9. The rules applicable to cancellation of listing were amended in 2018 and the current rules came into effect on 1 August 2018 (the Effective Date). Rule 6.01A(1) provides that "… the Exchange may cancel the listing of any securities that have been suspended from trading for a continuous period of 18 months."
 
10. Guidance Letter HKEX-GL95-18 (GL95-18) provides further guidance on long suspension and delisting. As noted in GL95-18, the objective of the amended delisting Rules is to keep the necessary trading suspension to the minimum, by facilitating timely delisting of issuers that no longer meet the continuing listing criteria. This, in turn, provides certainty to the market on the delisting process. The delisting Rules are also aimed at incentivising suspended issuers to act promptly towards resumption and deterring issuers from committing material breaches of the Rules.
 
11. Various transitional provisions are set out in Rule 6.01A(2). In the case of the Company, the relevant transitional rule is Rule 6.01A(2)(b)(ii), which applies to issuers which are not subject to a decision to commence the procedures to cancel a listing and a notice period for delisting immediately before the Effective Date, and when trading in that issuer’s securities has been continuously suspended for 12 months or more as at the Effective Date. Under that rule, the 18 month period referred to in rule 6.01A(1) commences 6 months before the Effective Date.
 
12. The practical effect of the above rules is that the Company’s listing could be cancelled if trading had not resumed by 31 July 2019.
 
13. Paragraph 12 of GL95-18 emphasises that, under the Rules, the Exchange would cancel the listing of a long suspended issuer upon the expiry of the remedial period (prescribed or specific) if the issuer has not remedied the issues causing the suspension and re-complied with the Rules.
 
14. Paragraph 19 of GL95-18 notes that the remedial period may only be extended in exceptional circumstances.
 
Listing Committee decision
 
15. In August 2019, the Listing Department recommended to the Listing Committee that the Company’s listing be cancelled on the basis that the Company had failed to fulfil all the resumption conditions and resume trading by 31 July 2019.
 
16. The matter was considered by the Listing Committee on 8 August 2019. The Listing Committee decided to cancel the Company’s listing under Rule 6.01A as the Company had failed to resume trading by 31 July 2019.
 
Developments following the Listing Committee decision
 
17. On 16 August 2019, the Company applied for a review by the Listing Review Committee of the Listing Committee’s decision.
 
18. The Company did not provide any written submission in support of its application for a review, but did seek a three-month postponement of the hearing, saying amongst other things that the audited financial statements and the independent investigation report, whilst not yet available, would be available by that time.
 
19. The Listing Department submitted that the Company had failed to fulfil satisfactorily all resumption conditions and resume trading and accordingly the Company should be delisted.
 
20. No representatives of the Company attended the hearing.
 
Listing Review Committee’s views
 
21. Trading had not resumed by 31 July 2019 and accordingly the Company’s listing could be cancelled under Rule 6.01A.
 
22. There were no exceptional circumstances warranting an extension to the remedial period or, accordingly, a postponement. There was no material evidence that the Company either had made, or had real prospects of making, substantive progress towards satisfaction of the resumption conditions.
 
Decision
 
23.    The Listing Review Committee therefore decided to decline the Company’s request for the hearing to be postponed, and to uphold the Listing Committee’s decision that the Company’s listing should be cancelled under Rule 6.01A.
 
Please note that decisions of the Listing Review Committee do not represent binding precedents, and do not constrain the discretion of or otherwise bind the Exchange or other committees (including without limitation the Listing Review Committee in respect of other matters).