ST Busen Yesterday's Shareholders' Meeting "Farce" Ended Again By The Shenzhen Stock Exchange.

After nearly two months of planning, the first provisional shareholders' meeting of *ST Busen (002569) ended in 2019. In the evening of September 2nd, *ST Busen announced that the witness was unable to participate in the shareholders' meeting as a result of the interference and pressure from the stakeholders of Dongfang Heng Zheng, so the shareholders' meeting was cancelled and the election was held separately.

After the announcement, the Shenzhen Stock Exchange rushed to inquire and asked *ST Busen to explain the cancellation of the legal basis and legal compliance of the shareholders' meeting and the reasons for the cancellation of the shareholders' meeting and the company's disclosure.

Public information shows that the company's largest shareholder, Dongheng Zheng, holds 16% stake in *ST Busen, but Zhao Chunxia, chairman of the company for a long time, is still the head of the company, and the contest between the two sides has extended from the daily management decision to the competition of the board seats.

Within two months, shareholders continued to force the court, and the provisional shareholders' meeting abruptly cancelled.

In September 2nd, it should be the day when *ST Busen convened the first provisional shareholders' meeting in 2019. In this interim shareholders' meeting, we need to deliberate on the motion of 8 directors or supervisors, such as the removal of the chairman of the board, the actual controller of the company and Zhao Chunxia.

However, on the evening of September 2nd, *ST Busen disclosed the meeting, but said that the shareholders' meeting failed to convene normally according to the statutory procedures. The company said that before the shareholders' meeting, the two shareholders' meetings appointed by Beijing Kyoto law firm witnessed lawyers' interference and pressure from the relevant shareholders of Dongfang Heng Zheng, a shareholder of the company before the meeting. Dongfang Heng Zheng had put pressure on the practicing lawyers by lending the identity of the management friends of Kyoto law firm, and made comments on their participation in the testimony of the shareholders' meeting, which made it impossible for the witness to witness the lawyer's ability to see the rights of the shareholders' meeting.

The company said that in view of the sudden occurrence of the incident, the continued meeting may damage the legitimate rights and interests of small and medium-sized shareholders. The chairman of the board of supervisors and Liu Yan, the moderator of the shareholders' meeting, announced that the shareholders' meeting should be cancelled and another day would be held. In addition, due to the termination of the shareholders' meeting, the shareholders at the scene failed to complete the registration.

Enterprise investigation shows that Dongheng Heng currently holds 16% of *ST Busen, the largest shareholder of the company. The 22 million 400 thousand stock of *ST Busen 16% now held by Dong Heng Zheng is acquired through judicial auction. It belonged to *ST Busen control shareholder Chongqing an Han Han Technology Co., Ltd.

According to the investigation, Dongheng Heng was founded in 2007, and its business covers technology development, technical consultation, technology transfer and so on. From 2016 to 2018, the company did not carry out substantive operations, nor did it control the core enterprises. As of December 31, 2018, the total assets of Dong Heng Zheng were 674 thousand and 900 yuan, and the net cash flow generated by operating activities was -8791.24 yuan.

Although Dongfang Heng is the largest shareholder, it has not yet obtained the actual control power. At present, the members of the board of directors are nominated by ANN technology and elected by the shareholders' meeting. The company's actual controller is still Zhao Chun Xia. Through the Shanghai Ruiwei asset management partnership (limited partnership), Zhao Chunxia indirectly owns 13.86% of the listed company and is the second largest shareholder of the company.

In May of this year, when the auction was just concluded, Dong Heng Zheng had said that in the next 12 months, it would not rule out holding shares of listed companies through two tier market holdings or other means. At that time, *ST Busen replied to the Shenzhen Stock Exchange's inquiry letter that orient Heng Zheng holds 16% of Busen shares and Shanghai Rui bird asset management partnership (limited partnership) holds 13.86% of the shares. At present, Busen shareholders do not have any shareholder who can actually control the voting power more than 30%, and through the actual control of the share right of the listed company, it can decide more than half of the members of the board of directors or have a major impact on the voting of the shareholders' meeting. Therefore, Busen shares do not have the risk of controlling competition for the time being.

"Beijing shareholders (Dongfang Heng Zheng) is really likely to become a real controller of the company," a person familiar with the matter told reporters.

Sure enough, in June 24th, *ST Busen announced that in June 21st, Wang Chunjiang was entrusted by the shareholders of the listed company, Meng Xianglong and Zhang Xu, and Li Ming was entrusted by the shareholders of the Chongqing listed company, Sanwei and Zhang Xingliang, to the company's board of directors to convene the first provisional shareholders' meeting in 2019, calling for the removal of all 6 non independent directors and two non staff supervisors of the company's board of directors. On the same day, Dong Heng Zheng submitted a proposal to the provisional shareholders' meeting, called for re election of members of the board of directors and board of supervisors, and nominated 6 directors including Wang Chun Jiang and Du Xin, and two supervisors of Deng Dafeng and Gao Peng.

In July 1st, *ST Busen announced that Li Ming and Wang Chunjiang were authorized to be unable to verify all the authorization. The incumbent directors and supervisors of the company were diligent and conscientious in performing their duties, and the reasons for calling for recall were not sufficient. Therefore, no provisional shareholders' meeting was convened.

The co proposer will not give up and send the letter to the board of supervisors. In July 7th, the company announced that the board of supervisors agreed to convene a provisional shareholders' meeting to consider removing the motion of the directors and supervisors. In August 14th and August 19th, Dong Heng Zheng sent a letter to the board of supervisors continuously, asking for consideration of its recommended board and board of supervisors at the provisional shareholders' meeting. The board of supervisors did not agree to submit an election bill for consideration by the provisional shareholders' meeting in accordance with the company law, the articles of association and operational reasons.

In August 22nd, Busen official micro-blog issued a statement. According to the statement, Dongheng is the largest shareholder and has never communicated with the incumbent directors and management of the company. Both Zhang Xu and Zhang Xingliang were new shareholders emerging at the end of the first quarter. Chongqing Xin Sanwei and Meng Xianglong were all shareholders of the real controller Xu Maodong after 2016. The company said that several parties cooperate, and the target refers directly to the board of directors and control of the company.

The listed company also said that in the past 3 years, Dongheng Zheng had been revoked its business license and did not disclose the source of the 16% equity fund, which was doubtful as the main qualification of the acquirer of the listed company.

So, in August 30th, *ST Busen disclosed a notice that received the notice of accepting the case. According to the announcement, the company filed a "civil complaint" with the Shaoxing intermediate people's Court on 19 August 2019, suing defendant Dongfang Heng Zheng that he did not have the shareholder qualification of the listed company.

According to the investigation, Dongfang Heng Zheng was revoked business license in 2016.

However, in the reply letter of *ST Busen's disclosure in September 2nd, Dongzheng Heng said that it did not exist in the past three years that it had revoked its business license and other major administrative penalties to meet the requirements of acquiring the listed company.

The Shenzhen stock exchange sent a letter quickly, and the whereabouts of the real controller Zhao Chunxia became a mystery.

The sudden cancellation of shareholders' meeting has aroused the concern of the Shenzhen Stock Exchange. In the letter of concern, the Shenzhen Stock Exchange asked *ST Busen to cancel the legal compliance of the shareholders' meeting.

The Shenzhen Stock Exchange noted that online voting is only a convenience provided by the company to facilitate shareholders' participation in shareholders' meetings, and does not belong to the convening of shareholders' meetings. The twentieth rule of the general meeting of shareholders of listed companies stipulates that shareholders attend the shareholders' meeting through the Internet and other means. Therefore, the Shenzhen Stock Exchange asked the company to explain the legal compliance of the above statement.

In addition, the total share capital of the company is 140 million shares, and the number of shareholders represented by Internet voting is 80 million 340 thousand shares, accounting for 57% of the total share capital of listed companies. The Shenzhen Stock Exchange asked the company to combine the 103rd articles of the company law and the vote of various motions to explain whether the motion was approved and formed a resolution.

The concern is that Zhao Chunxia, the real controller who has been overseas, is a mystery. In August 28th, *ST Busen announced that "although chairman Zhao Chunxia is receiving medical treatment due to ill health, he still insists on attending meetings of the board of directors and company management meetings through telephone conferences, and personally approves matters requiring approval from the chairman in the production and operation process, and performs his duties normally."

In August 28th, *ST Busen released the 2019 China Daily. Data show that in the first half of this year, the company recorded an operating income of 181 million yuan, an increase of 4.35% over the previous year, and a net loss of 4 million 320 thousand yuan, a deficit of 8 million 420 thousand yuan over the same period. Although the loss has narrowed, it has failed to turn around the deficit. It is worth noting that if *ST can not be profitable in 2019, Busen will be delisted.