China Essence sorting out stock-transfer issue

Trading in its shares suspended as firm seeks more time to give SGX additional info on unauthorised transfers

Trading in China Essence Group shares was suspended yesterday after the firm disclosed that there had been unauthorised stock transfers to a Chinese local government authority.

The share transfers stemmed from a protest by farmers that almost turned into a riot.

The farmers were protesting about money owed to them by two China Essence Group subsidiaries.

When the protest threatened to get out of hand, the local government authority stepped in to clear the longstanding arrears.

"In return, the two subsidiaries had to transfer the shares to the local government (to be) held in trust," said the company's former executive chairman and chief executive, Mr Zhao Libin.

The mainboard-listed company, which is incorporated in the Cayman Islands, has been on the SGX watch-list since June last year. The company posted a loss of 25.37 million yuan (S$5.68 million) for the three months ended June 30.

China Essence told Singapore Exchange (SGX) yesterday that Mr Zhao had overseen this transfer but did not inform the board.

Trading in its shares will be suspended until further notice as the company said it needs more time to provide additional information to the stock exchange.

In an earlier statement, China Essence said that accountancy firm Moore Stephens had uncovered changes in shareholdings of at least two of the subsidiaries that had occurred in April.

The company overhauled its board on Aug 3, with the resignations of three directors, who quit to "pave way for board restructuring", said the company in an announcement then.

This came after the resignations of independent director Peter Lai in June and company secretary Teo Meng Keong in July.

The company's auditors from BDO Limited and BDO LLP also quit in late July over "long-outstanding" audit fees.

New directors, who were appointed in August, had no prior knowledge of these transactions, said China Essence yesterday.

Non-executive independent chairman Er Kwong Wah, who was a member of the old board, said that this board did not authorise or approve the changes.

The shareholding changes were also not reported in the company's first-quarter results announcement on Aug 14.

China Essence said it will "take proper actions" after seeking advice from the authorities and its legal adviser.

The mainboard-listed company, which is incorporated in the Cayman Islands, has been on the SGX watch-list since June last year.

The company posted a loss of 25.37 million yuan (S$5.68 million) for the three months ended June 30.

The shares of China Essence Group closed unchanged at 1.4 cents yesterday, when trading was suspended in the morning.

A version of this article appeared in the print edition of The Straits Times on September 08, 2015, with the headline 'China Essence sorting out stock-transfer issue'. Print Edition | Subscribe