China stock market

Shenzhen hotel group sues local stock exchange over delisting

Hotel was removed from the Shenzhen Stock Exchange in July. Shenzhen’s Intermediate People’s Court formally placed the case on file on Monday

PUBLISHED : Tuesday, 19 September, 2017, 6:03pm
UPDATED : Tuesday, 19 September, 2017, 10:57pm

Shenzhen Century Plaza Hotel, the first company delisted in China this year, has filed a lawsuit against the Shenzhen Stock Exchange in an intermediate court in Shenzhen, asking the court to quash the exchange’s delisting decision.

Century Plaza Hotel was removed from the Shenzhen Stock Exchange in July.

Shenzhen’s Intermediate People’s Court formally placed the case on file on Monday, according to public information on the court’s website.

The court said it will disclose its “effective judge statement” on the internet on China Judgements Online, the nation’s official court paper website, unless the related party files an application against public disclosure.

In response to the lawsuit, the Shenzhen Stock Exchange said in a statement late on Tuesday that its decision to terminate Shenzhen Century Plaza Hotel’s listing status had “sufficient legal and factual basis”.

“We will resolutely implement our responsibility as the main body of delisting (mechanism),” the exchange added.

As Chinese regulators have tightened control over risks in financial markets, the number of delistings and listing suspensions has increased.

Previously, the Shenzhen exchange has also terminated the listing status of Dan Dong Xin Tai Electric, which is scheduled to exit the start-up board later this year.

Taking that into account, there are two confirmed delisting cases so far this year.

However, in 2016 and 2015 each, there was only one compulsory delisting.

Meantime, the number of listing suspensions has increased to five so far this year, including Shenyang Ingenious Development, the highest number since 2011.

Shenzhen Century Plaza Hotel joined the Shenzhen Stock Exchange in 1994 as the city’s first listed hotel operator. In 2011 Guang Group, a Shenzhen real estate developer, acquired a controlling stake in the company.

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However, in 2014 the securities regulator investigated Century Plaza Hotel for suspected violations of securities rules when it secretly provided loan guarantees to Guang Group, and failed to disclose related information to the public. The regulator fined the company for the alleged misdeeds in 2015.

The same year Century Plaza Hotel was suspended as a listed company after the auditors issued a disclaimer of opinion on its financial statements for 2014 and 2015, due to the company’s provision of loan guarantees against securities rules.

The disclaimer of opinion by auditors for two consecutive years triggered the exchange’s clauses on listing suspension.

In May 2017 the China Securities Regulatory Commission (CSRC) launched another investigation against Century Plaza Hotel for suspected violations of rules regarding information disclosure.

In the same month, the Shenzhen Stock Exchange terminated Century Plaza Hotel’s listing status, citing the company’s failure to generate positive profits following a two-year suspension of its listing status.

The stock was formally removed from the exchange on July 7.