Ruisen Living Services (01922.HK): Supplementary Disclosure of Connected Transaction Investigation Findings, Involving Pre-IPO Advances, Fund Diversion and Property Purchase
On January 15, Ruisen Living Services Co., Limited (01922.HK) issued an announcement to provide supplementary explanations on several connected transactions that were not fully disclosed in the second-phase investigation report completed by the independent forensic accountants previously.
The supplementary investigation findings mainly include the following:
Unsettled connected-party advances prior to IPO: The company had promised in its prospectus that all amounts receivable from connected parties as of April 30, 2019 would be settled before the IPO. However, the investigation found that after the company received a payment of RMB 93 million from its connected party Yincheng Group on October 30, 2019, it transferred the same amount back to the latter’s account on November 1, 2019, resulting in the relevant advance balance not being actually settled.
Diversion and unauthorized use of IPO proceeds: Shortly after the company’s listing, approximately HK$120 million of the IPO proceeds was transferred to Yinjiacheng, a connected party. This act constituted a change in the use of IPO proceeds, yet the company failed to make a disclosure announcement in accordance with the regulations. Due to multiple fund transactions between the two parties, the repayment status of this sum of money remains unclear.
Circulation of payment for connected property purchase: In 2019, the company made two payments totaling approximately RMB 29.6 million to Yincheng Group, one of which was marked as an advance payment for the purchase of the "Yilan Jun" property. In April 2020, after Yincheng Group refunded the payment, the company redirected the fund to a third party named Jing’an Security, which used the money to purchase the same property from a connected party of Yincheng Group.
The aforementioned transactions further reveal the complex fund transactions between the company and its connected parties as well as potential corporate governance issues. The company’s shares have been suspended from trading since August 28, 2024, and will remain suspended.
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