Recently, inquiries have surfaced regarding the past shareholding entrustment arrangements at Bank of Chengdu Co., Ltd. This matter, which dates back years and involves a certain "Che," has rarely been publicly reported.
The issue came to light through a judicial auction, uncovering a 16-year-old secret of shareholding entrustment at the bank. On April 23, 2024, 50 million shares of Bank of Chengdu were sold for approximately 700 million yuan on Alibaba’s judicial auction platform. While seemingly routine, the auction drew significant market attention as the shares were labeled "assets involved in criminal cases."
The auction documents revealed a long-concealed fact: these shares, nominally owned by Shanghai Dongchang Investment Development Co., Ltd., were actually held by a mysterious individual referred to as "Che," marking them as assets tied to criminal proceedings.
**A Hidden Shareholder Emerges After 16 Years** The shareholding entrustment arrangement traces back to 2007. At the time, Chengdu City Commercial Bank (the predecessor of Bank of Chengdu) issued 2 billion shares via a private placement. Dongchang Investment subscribed to 120 million shares at 3 yuan per share, becoming the bank’s seventh-largest shareholder.
For 16 years, Dongchang Investment remained listed among Bank of Chengdu’s major shareholders. However, the judicial auction exposed the true ownership of 50 million shares—Che was the actual beneficiary, with Dongchang Investment merely acting as a nominee holder.
Bank of Chengdu’s 2018 interim report showed that 50 million shares held by Dongchang Investment were frozen, though no specific reason or entrustment details were disclosed. It wasn’t until April 2024, when the Changsha Intermediate People’s Court published the auction notice, that the truth about the shareholding entrustment came to light.
**Auction Results: Zheshang Securities and Individual Investors Step In** The auction attracted multiple institutional bidders. Ultimately, Zheshang Securities secured 30 million shares for 423.6 million yuan, positioning it as the bank’s tenth-largest shareholder. Three well-known individual investors—Wei Wei, Zhong Ge, and Zhang Shouchun—acquired 10 million, 5 million, and 5 million shares, respectively.
The bidding was intense, with some lots receiving 21 offers. The final transaction price represented a 4.87% premium over the starting bid.
The auctioned shares accounted for 1.31% of Bank of Chengdu’s total equity. Even excluding Dongchang Investment’s remaining holdings, Che would have ranked as the bank’s ninth-largest shareholder with these 50 million shares.
**Is Shareholding Entrustment Legal?** Legal experts note that while shareholding entrustment does not inherently violate corporate autonomy principles for general companies, the case differs for listed banks.
Article 12 of the *Interim Measures for the Administration of Commercial Bank Equity* explicitly states: "Shareholders of commercial banks shall not entrust others or accept entrustment to hold equity in commercial banks." Thus, such arrangements are clearly non-compliant for commercial banks.
In 2023, a high-profile case involving a commercial bank’s shareholding entrustment agreement was ruled invalid by the Shandong High Court, cited as one of the year’s top ten commercial litigation cases. The court deemed the agreement in clear violation of regulatory rules.
Financial regulators have intensified crackdowns on shareholding entrustment in recent years. Since 2019, the former China Banking and Insurance Regulatory Commission has launched campaigns targeting equity and related-party transactions, resulting in the removal of over 2,600 non-compliant shareholders.
The Bank of Chengdu shareholding entrustment case has reached a temporary conclusion with the completion of the 700 million yuan share auction.
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