A secretive extension of payment terms for related-party transactions via an undisclosed supplemental agreement has landed Autel Intelligent Technology Corp., Ltd. (688208.SH), a STAR Market-listed company, with simultaneous regulatory sanctions from both the Shenzhen Securities Regulatory Bureau and the Shanghai Stock Exchange.
The Shenzhen bureau recently issued corrective orders against Autel and warning letters to then-Chairman/CEO Li Hongjing, Director/Deputy GM Nong Yingbin, and former Board Secretary Fang Wenbin. Concurrently, the Shanghai exchange imposed disciplinary actions on the company and responsible individuals. These moves expose governance and disclosure flaws in the tech firm, which had reported robust revenue and net profit growth for the first three quarters of 2025.
**Regulatory Crackdown** In early December 2025, Autel disclosed receiving Shenzhen bureau's corrective order and warning notices. The Shanghai exchange released parallel disciplinary documents. Investigations revealed four major violations: 1) Unapproved modification and nondisclosure of related-party transaction terms 2) Undisclosed fund occupation by related parties 3) Failure to disclose concerted action among top shareholders 4) Incomplete shareholder meeting documentation
These breaches violated multiple regulations including the Listed Companies Information Disclosure Management Measures.
**Rejected Defenses** Autel and executives Li and Nong argued the payment extension didn't constitute material transaction modification or fund occupation, claiming no intentional misconduct. Nong additionally stated she wasn't responsible for related-party transaction oversight. Regulators firmly dismissed these arguments, confirming the extended payment terms materially altered original deals and created de facto fund occupation.
**Core Violation** The case centers on undisclosed post-transaction modifications that substantially prolonged payment deadlines to related parties without proper internal review or public disclosure - effectively enabling fund diversion while compromising minority shareholders' rights.
**Financial Discrepancy** Despite reporting stellar Q3 2025 results (34.96 billion yuan revenue, up 24.69% YoY; 733 million yuan net profit, surging 35.49%), Autel's operating cash flow plummeted 55.75% to 202 million yuan, creating stark profit-cash flow divergence that raised market concerns.
**Underlying Risks** The company's debt ratio reached 50.23% by Q3 2025, more than doubling from its 20.22% level at its 2020 STAR Market debut. This debt surge coupled with cash flow deterioration has intensified scrutiny over financial health. The sanctions could potentially impact Autel's ongoing preparations for a Hong Kong IPO, despite recent board approvals for governance structure amendments in November 2025.
**Listing Implications** The Shanghai exchange's public censure will be recorded in China's securities credit database, creating lasting reputational damage as Autel pursues its HK listing. Having raised approximately 2.5 billion yuan through STAR Market IPO (2020) and convertible bonds (2022), the company now faces investor skepticism about its governance standards amid continued capital market activities.
Autel stated it takes the violations seriously and will implement comprehensive rectification, maintaining the issues won't affect normal operations. However, these regulatory records will remain an indelible mark as investors evaluate the company's Hong Kong listing prospects.
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