CA CULTURAL (01566.HK): Independent Investigation Completed with No Evidence of Fraud or Misappropriation, Reports Adopted, Trading Remains Suspended
NewTimeSpace News: CA Cultural Technology Group Limited (stock code: 01566) announced on August 7 that the Independent Committee has completed its independent forensic investigation into a number of transactions of the Group (including transactions leading to impairments for the fiscal years 2022 and 2023) and reported to the Board, which reviewed and adopted the investigation findings on the same day. The investigation was conducted by Pui Chun Certified Public Accountants Limited as the independent investigator. Both the Phase 1 report (dated March 2, 2026, covering Events 1 to 3) and the Phase 2 report (dated July 27, 2026, covering Events 4 to 20) have been completed, and the Board considers that the two reports have fully addressed the issues raised under resumption guidance (a) and (b).
In terms of key findings, Event 1 involved a project management contract entered into with China Consultancy Limited, under which an advance payment of HKD 50 million was made for the Thailand project. The investigation found no evidence of misappropriation of funds, embezzlement or financial fraud by the Group's management, although the consultant made no substantial contribution to the agreed matters, and the Group has established a receivables collection committee and engaged legal advisers to seek recovery of the funds. Event 2 confirmed that Mr. Chong Heung Chung, executive director, provided financial support to the Group aggregating HKD 81,954,820.82 between 2018 and 2021, sourced from proceeds of approximately RMB 435,125,558.75 from the sale of his industrial parks in Huizhou and Shenzhen, and facilitated short-term bridging financing of HKD 80 million with personal guarantees; the investigation found no evidence that Mr. Chong received any consideration or personal benefit. Event 3 involved a share subscription default by ACCP Global (subscription for 86,000,000 shares at HKD 2.50 per share, aggregating HKD 215 million in September 2021, with the first tranche of 40,000,000 shares left unpaid with consideration of HKD 100 million) and a winding-up petition by Maxx Capital (dismissed by the High Court on December 20, 2022), during which the Company's share price plunged 76.54% on October 6, 2021.
In respect of Events 4 to 9, the Group paid an aggregate of approximately HKD 315 million in advance payments to six contractors for theme park construction in China, which suffered severe delays and impairments due to the COVID-19 pandemic and changes in government policies. The Group entered into project restart agreements with the contractors between October 2023 and April 2024, and several Joypolis and Wonder Forest theme parks, including those in Shanghai and Hong Kong, have been completed, delivered and put into operation. For Events 15 to 20, covering consultancy, IP licensing and VR game development transactions, the Group recognized residual impairments of HKD 188,361,149 and HKD 58,800,372 in respect of its long-term assets and joint ventures for fiscal years 2022 and 2023 respectively.
The independent investigator considers that the transactions were driven by genuine commercial needs and were consistent with the Group's strategic transition to a light-asset business model; sufficient due diligence and background checks were conducted before entering into the agreements; the counterparties and their ultimate beneficial owners were independent third parties; and no evidence was found of fraud, embezzlement, misappropriation of assets or personal gains by directors or management. The counterparties' defaults were mainly attributable to factors beyond the Group's control, including the COVID-19 pandemic and changes in government policies. The impairments were made after prudent consideration and based on the professional opinions of independent valuers, and management's remedial actions (including establishing a receivables collection committee, issuing demand letters, and entering into project restart agreements and debt offsetting arrangements) were reasonable. The Independent Committee and the Board consider the investigation reports reasonable and acceptable, and have no reasonable regulatory concerns regarding the integrity, capability and/or character of the Group's management and any persons with significant influence over the management and operations of the Group, and recommend implementing all rectification recommendations proposed by the internal control adviser.
The Company also announced that, based on the Board's understanding, the Independent Commission Against Corruption (ICAC) has concluded and terminated its investigation into the Group's affairs, and no director or employee of any member of the Group has been arrested or prosecuted by the ICAC. Trading in the Company's shares has been suspended on the Stock Exchange since 9:00 a.m. on November 21, 2024, and will remain suspended until further notice.
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