ZhengtongAuto <1728> termination of continuing connected transactions

Hong Kong Exchanges and Clearing Limited’s wholly-owned subsidiary, The Stock Exchange of Hong Kong Limited, has announced disciplinary actions against China ZhengTong Auto Services Holdings Limited (1728) and several of its former executives. The Exchange has issued a Director Unsuitability Statement and censured Mr Wang Mu Qing and Mr Shao Yong Jun, deeming them unsuitable for directorship or senior management roles. Additional censures were imposed on Mr Koh Tee Choong, Mr Li Zhubo, and Mr Wang Kunpeng, with the latter three required to attend training.

The disciplinary measures stem from a series of transactions involving a subsidiary of the company and a firm majority-owned by the chairman’s son. In 2016, the subsidiary entered into an undertaking to cover a potential shortfall of RMB1.8 billion if the related company failed to repay a loan or redeem investments. This undertaking was later replaced by three agreements in March 2020. These transactions were classified as major and connected under the Listing Rules, yet the company failed to comply with disclosure and approval requirements.

The chairman approved these transactions without declaring conflicts of interest or ensuring transparency with the board. Other executives also failed to independently assess the risks and benefits of the agreements and relied excessively on the compliance department. The Exchange emphasized that directors must prioritize the company’s interests, avoid conflicts, and ensure compliance with regulatory standards.