Disciplinary Measures Taken Against Three Former Executives of Jiayuan Service by Hong Kong Exchange

The Hong Kong Exchange has taken disciplinary action against three former senior executives of Jiayuan Service (ASX: 01153), including former Chairman, Group President and Executive Director Mr. Zhu Hongge, and former Executive Directors Mr. Bao Guojun and Mr. Pang Bo.

The exchange stated that they failed to fulfill their director duties under the Listing Rules and issued declarations of director unsuitability, declarations of investor interest impairment, and censures against them.

The company, over an extended period from January 2021 to December 2022, made 398 unauthorized fund transfers totaling nearly RMB 2 billion to multiple entities controlled by its then-controlling shareholder, as directed by that shareholder.

These fund transfers were executed without reporting to or obtaining approval from any of the company's directors.

The company failed to recover approximately RMB 644 million transferred out under the controlling shareholder's directives and subsequently wrote off all related receivables, resulting in significant financial loss for the company.

Exchange's Findings on Director Failures

The Hong Kong Exchange (HKEX) determined that the three former directors failed in their duties under the Listing Rules, with details as follows.

Mr. Zhu was informed of the fund transfers on multiple occasions but took no action on the matter.

The company's financial funding center proposed artificially inflating the group's bank balance amounts and forging related bank statements and seals, which Mr. Zhu approved by signing the relevant documents.

Although Mr. Zhu claimed he was not knowingly concealing the fund transfers, his approval of the proposal constituted a serious breach of his director duties regardless.

Mr. Bao and Mr. Pang neglected their director duties to oversee the company's financial matters, including its bank balances.

Consequently, despite the unauthorized transfers persisting over a long period and involving substantial sums, the two were not in a position to discover them.

Broader Governance Failures Identified

All three directors also failed to act with the requisite skill, care, and diligence.

They relied excessively on the company's finance team to handle financial matters without providing proper oversight and did not ensure the effectiveness of the company's internal control systems.

The company's internal control systems were effectively overridden by the controlling shareholder.