Nanjing Panda Electronics chairman Li Anjian yesterday said that the No2 Intermediate People's Court of Beijing froze a 3.97 per cent stake held by Panda Electronics Group for one year from October 25.

The court took action because of contractual disputes between Panda Electronics Group and the Export-Import Bank of China.

It was the third time Panda Electronics Group's shares in its subsidiary had been frozen.

On July 11, the High People's Court of Jiangsu province froze 50 million shares for a year, citing contractual disputes between Panda Electronics Group and Citic Bank.

And the Suzhou Intermediate People's Court of Jiangsu province froze 10 million shares for a year on April 26.

As of May 23, Panda Electronics Group, which owns 54.2 per cent of Nanjing Panda Electronics, had pledged 26.33 per cent of its subsidiary as collateral for loans from various banks.

Operations of the satellite communication and electronics manufacturer would not be hindered by the court's move, said Nanjing Panda Electronics Securities Affairs representative Chen Yebao.

'This won't affect our operations, as the freezing of shares has nothing to do with our operations,' Mr Chen told the South China Morning Post.

But the company's image would be tarnished, said Kenny Tang Sing-hing, an associate director at Tung Tai Securities. 'The share freeze reflects financial problems in the mainland parent and it will affect the image of its listed subsidiary,' he said.

'The market will worry about the corporate governance of the listed firm, since it conducts many connected transactions with its parent and depends heavily on its parent.'

He said the fact that the senior management of the mainland parent and its listed subsidiary were the same was cause for concern. .

Li Anjian is chairman of both Nanjing Panda Electronics and Panda Electronics Group, while Zhang Zuzhong is vice-chairman of Nanjing Panda Electronics and Party Secretary of Panda Electronics Group, a state-owned firm.

Nanjing Panda Electronics has its own debt and corporate governance problems. In March, a mainland court forced Nanjing Panda to surrender its majority stakes in two subsidiaries to repay a 120 million yuan debt.

In September, the firm admitted it had failed to properly disclose more than two billion yuan of transactions between its parent and its former executive Ma Ziping, who is under arrest in China.

Cold comfort

86m of parent's Nanjing Panda shares frozen

A quarter of subsidiary pledged as collateral for bank loans

Two billion yuan of transactions improperly disclosed