Shanshui Cement’s new board seeks police help on “missing documents and data”
China Shanshui Cement Group, which last month defaulted on a 2 billion yuan bond and saw its entire board ousted early this month, says it has reported to the Hong Kong Police that some key documents, data and company stamps are missing from its Hong Kong office, while its Shandong unit warned it may default on another 1.8 billion yuan bond due to mature on January 21
China Shanshui Cement Group, which last month defaulted on a two billion yuan bond and saw its entire board ousted early this month, says it has reported to the Hong Kong Police that some key documents, data and company stamps and a seal are missing from its Hong Kong office, while its Shandong unit warned it may default on another 1.8 billion yuan bond due to mature on January 21.
The development suggested that the seven-month battle for control over the company has escalated as the original board directors and senior managers have refused to cooperate with the new board.
It also raises concern that the company’s new board, led by its largest shareholder Tianrui Group – parent of Hong Kong-listed rival China Tianrui Group Cement – may have difficulty managing some aspects of its operations without the allegedly stolen company assets.
The new board was installed after a shareholders’ meeting voted them in on December 1.
“Upon the company having taken back possession of the [Hong Kong office] from the removed directors, the company has conducted a thorough search ... and is unable to locate certain books, records and important documents including the relevant company stamps, seal etc, or retrieve any electronic data from the company’s computers,” it said in a filing to Hong Kong’s stock exchange late on Tuesday.
The assets belong to the company as well as its two Hong Kong subsidiaries, it added.
It said its office in Admiralty “were at all material times in the possession and or under the control of the removed directors” after the December 1 meeting, on which they voted to oust the entire board including ex-chairman Zhang Bin. His father and company founder, Zhang Caikui, was removed by shareholders in October.
The new board has made enquiries with each of the removed directors and “has not received a positive response”, China Shanshui said, adding it on Monday made a report to the police “in respect of the possible theft or unlawful removal of the said books, records and important documents or data”.
Stephen Liu Yiu-keung, the managing director of transaction advisory services at accountancy EY and a receiver of the company’s second-largest shareholder China Shanshui Investment, told the South China Morning Post late on Tuesday that on December 1 a notice was posted on the office door saying it was temporarily closed.
“We tried to call the office phone, but it went to voice mail,” he said. “After seeking legal opinion, we had a locksmith open the door under the witness of a lawyer and found a pretty empty office.”
He said the fact that the company’s seal and stamps are missing should not affect its ability to operate its bank accounts and financial affairs in Hong Kong, since the seal can be replaced.
Some documents, such as bank statements, can be replaced relatively quickly, while others, such as supporting documents of purchases and funds transferred, will, if replaceable, take longer, he said.
Since employees at the office were also nowhere to be found, the new board will try to track them down by tracing mandatory provident fund contribution records.
“Is it the case that certain people have removed or destroyed the documents because they do not want the new board to see them? That is something we want to find out,” Liu said.
Meanwhile, China Shanshui’s principal operating subsidiary in Shandong province, Shandong Shanshui, issued a statement on Tuesday at Chinabond.com.cn, the official information disclosure platform for bonds issued on the mainland.
It warned that due to tight cash flows, it will most likely be unable to repay the principal and interest due on a 1.8 billion yuan three-year bond maturing on January 21.
It has still been unable to repay a two billion yuan bond that matured on November 12.
The statement was stamped with the company seal.
Liu said the statement was unauthorised and issued without the approval of the new China Shanshui board.
Despite a high-profile comment to the media by China Shanshui’s new chief executive Li Heping last week that he was confident the new board will soon take over the Shandong unit, without possession of the company seal, it looks like an uphill battle as he has been unable to wrest control over even the company’s web-site.
The day after his arrival in Jinan on December 21 to try to take over Shandong Shanshui, a statement bearing the Shandong unit’s company seal was posted on its website, saying under the coordination of the municipal government of Jinan where it is based, “there was no such thing as a handover of management”.
The statement claimed that the Zhangs remain the current directors of the Shandong unit, despite the earlier filing by the new board of China Shanshui to Hong Kong’s stock exchange saying they have already been removed.