Recently, the first share of “Zhang Xiaoquan” (301055), a Chinese scissor and knife company, announced that its controlling shareholder and actual controller have been listed as the executed persons by the Xi’an Intermediate People’s Court in Shaanxi Province, involving an amount of 245 million yuan. Additionally, the company has experienced a significant decline in net profit and non-net profit for two consecutive years, leading to an inquiry letter from the Shenzhen Stock Exchange regarding its annual report.
On the evening of May 24th, Zhang Xiaoquan Co., Ltd. (referred to as “Zhang Xiaoquan”) issued a public announcement stating that its controlling shareholder, Hangzhou Zhang Xiaoquan Group Co., Ltd. (referred to as “Zhang Xiaoquan Group”), and the actual controller, Zhang Guobiao, have been subject to execution application by Shaanxi Jian Gong Business Factoring Co., Ltd. (referred to as “Shaanxi Jian Gong”) due to delayed payment of principal and interest by Fuchun Holdings Group Co., Ltd. (referred to as “Fuchun Holdings Group”), involving an amount of 245 million yuan.
Currently, Fuchun Holdings Group is in communication with Shaanxi Jian Gong seeking a resolution. Failure to reach a settlement could result in the forced execution or freezing of 17.5 million shares of company stock pledged by Zhang Xiaoquan Group.
According to the “Notice Letter” provided by Fuchun Holdings Group, on December 12, 2022, Shanghai Bentu Industrial Co., Ltd. (referred to as “Bentu Industrial”) signed a “Domestic Commercial Factoring Contract (with recourse)” with Shaanxi Jian Gong, in which Bentu Industrial transferred four accounts receivable of Fuchun Holdings Group to Shaanxi Jian Gong, receiving 200 million yuan in accounts receivable financing.
Concurrently, Zhang Xiaoquan Group provided collateral in the form of 17.5 million shares of Zhang Xiaoquan Co., Ltd., with Zhang Guobiao and other parties providing joint liability guarantees.
On May 22nd, Fuchun Holdings Group failed to timely repay the principal and interest, prompting Shaanxi Jian Gong to apply for execution and file a case with the Xi’an Intermediate People’s Court in Shaanxi Province. Fuchun Holdings Group, Bentu Industrial, Zhang Xiaoquan Group, Zhang Guobiao, and other parties were listed as the executed persons by the Xi’an court.
Due to the notarized factoring contract having the effect of compulsory execution, Shaanxi Jian Gong directly applied for execution and filed a case with the court through notarization.
On May 24th, the sponsoring institution of Zhang Xiaoquan, CITIC Securities, issued a special verification opinion stating that the actual controller (Zhang Guobiao) and Fuchun Holdings Group indirectly hold the company’s shares through Zhang Xiaoquan Group (the controlling shareholder of Zhang Xiaoquan). As of the date of the verification opinion, Zhang Xiaoquan Group’s held shares are still in a lock-up period, with 99.90% of the shares being pledged.
CITIC Securities mentioned that if the debt cannot be repaid in a timely manner, if the parties involved cannot reach a settlement, or if the credit situation of the controlling shareholder and some actual controllers further deteriorates or triggers other litigation, Zhang Xiaoquan Company may face the risk of unstable or changing control.
Furthermore, in 2023, Zhang Xiaoquan Company achieved an operating income of 811 million yuan, a year-on-year decrease of 1.82%; a net profit of 25.1183 million yuan, a year-on-year decrease of 39.48%; a non-net profit of 20.2666 million yuan, a year-on-year decrease of 42.69%; the company’s net profit and non-net profit have experienced a significant decline for two consecutive years.
On May 22nd, Zhang Xiaoquan Company received an annual report inquiry letter from the Shenzhen Stock Exchange, requesting a detailed explanation for the decline in net profit and future risks. Simultaneously, the exchange inquired about the execution situation of the actual controller and controlling shareholder, demanding an explanation from Zhang Xiaoquan by June 5th and public disclosure.