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Elaine Chan

Late disclosure coincides with growing concerns over transparency at private firms

Sichuan Topsoft Investment yesterday revealed 23 more lawsuits from mainland companies and banks for payment defaults totalling 460 million yuan, the latest in a string of delayed disclosures that are undermining confidence in listed Chinese private firms.

Combined with 10 other lawsuits the Shenzhen-listed software developer has revealed in the past month, the company faces potential liabilities of 1.79 billion yuan, or nearly 180 per cent of its unaudited net assets as at the end of last year.

The securities regulatory bureau of Sichuan province, where the company is based, and the Shenzhen stock exchange directed the company to issue the disclosures.

The lawsuits have been filed and heard in 16 Chinese jurisdictions over several years.

The plaintiff banks included Bank of Communications, Industrial and Commercial Bank of China, China Construction Bank and Citic Industrial Bank.

Citic Industrial sued Topsoft in a Sichuan court, saying the company had guaranteed a 136 million yuan loan for its corporate parent - Top Group - which defaulted. The court froze Topsoft and Top Group assets to cover the loan amount.

Other plaintiffs include a number of development zone operators and equipment suppliers claiming Topsoft and its related companies have failed to pay their bills.

Another beleaguered private firm, D'Long International Strategic Investments, yesterday unveiled  more bad news in a statement to the Shanghai stock exchange. D'Long company Xinjiang Tunhe Investment, a  tomato sauce maker, failed to pay for a 90 per cent stake in an unprofitable agriculture-related venture, the statement said.

Xinjiang Tunhe was also sued by Yinchuan City Commercial Bank over a guarantee for a 600 million yuan line of credit for Ningxia Islamic International Trust and Investment. A Ningxia province court froze the company's stake in a financial service firm that was used as collateral in the deal.

'There will be more cases like Topsoft and D'Long,' said Zhang Qi, an analyst from Shanghai-based Haitong Securities, saying a recent crackdown on dubious lending had prompted banks to be more aggressive in reclaiming bad loans.

The failure of the firms to promptly disclose their problems underscored a lack of transparency, he said. 'People who should be responsible aren't taking on the responsibility, and instead investors have to suffer,' Mr Zhang said.



Sichuan Topsoft faces more lawsuits