Dashan Education's (9986) chairman Zhang Hongjun has resigned from all his positions, after the company's shares were halted trading by the Securities and Futures Commission over significant overstatement of its corporate bank balances.
The firm announced that Zhang Hongjun has stepped down from executive director and chairman, chairman of the Nomination Committee, chairman of the Investment Management Committee, member of the Remuneration Committee, and Authorized Representative under Listing Rule 3.05, which took effect from December 1.
Earlier, the SFC suspended the share trading of Dashan Education from 9 am on Wednesday, saying that the move is desirable to maintain a fair and orderly market and to protect the interest of the investing public during the SFC's investigation.
Dashan’s shares were once suspended for trading on 30 March 2023 as its former auditor identified certain audit matters related to a software development project and its acquisition of a UK-based company.
Following the investigation by Dashan and its advisers concluded with no adverse findings, the company resumed share dealing in September 2024.
However, when the SFC made its own inquiry into the payments relating to these two issues, the commission found material discrepancies between the bank statements provided by Dashan and those it obtained independently. In particular, the bank statements provided to the SFC by Dashan omitted specific circular fund flows that returned to the firm.
The SFC also uncovered material overstatements of bank balances in Dashan’s financial statements, totaling 36.4 million yuan (HK$40.1 million) as of 30 June 2023 and 76.3 million yuan as of 31 December 2023, which represented 19 percent and 55 percent of its net asset value in its published financial results in 2023.
Under such discoveries, the SFC suspected that its software development and the UK acquisition were neither genuine nor conducted at arm’s length, and it had submitted fabricated bank statements to the SFC to conceal questionable fund flows related to these transactions, as well as the significant overstatement of its corporate bank balances.
The SFC said it held serious concerns about the integrity of Dashan’s management, in particular the company’s executive director, Zhang Hongjun, the reliability of its internal controls and accounting systems, and its ability to keep the market properly informed.
Furthermore, the commission raised suspicions on its resumption of trading in September 2024, which was based on false or misleading information provided by itself.
Dashan was listed on the main board of the Hong Kong Stock Exchange in July 2020. Before the trading halt, the company's stock price stood at HK$1.88.
