Home appliance maker Guangdong Kelon Electrical Holdings plans to use internal reserves to offset an accumulated loss of 1.38 billion yuan (about HK$1.3 billion) and has revised its corporate rules in an attempt to repair damage done by its former controlling shareholder. The moves were made at the request of the China Securities Regulatory Commission (CSRC) and Hong Kong Exchanges and Clearing, a company spokesman said. The company was asked to remedy malpractices related to board and shareholders meetings, information disclosure and accounting. A CSRC investigation found Kelon had advanced 1.26 billion yuan to former controlling shareholder Rongsheng Group through a series of undisclosed connected transactions involving bank borrowings, the purchase of raw materials, the payment of advertising costs, bank guarantees and debt transfer. The transactions dragged Kelon into financial trouble. The company intends to offset the accumulated loss with cash drawn from its statutory common and capital reserves, pending shareholder approval. The company will draw its entire statutory common reserve of 229.16 million yuan and 1.15 billion yuan from its 2.45 billion yuan capital reserve. 'To increase flexibility in carrying out the company's future profit allocation, the company is required to make up for losses in previous years pursuant to the relevant state regulations,' Kelon said. Analysts said it could take Kelon several years to restore investor confidence. The revised corporate rules ban directors, supervisors, managers and other managerial officers from trading in the company's shares during their tenure or within six months of leaving. The company is also required to prevent connected persons from monopolising its purchase and sales channels.