(Yicai) July 10 -- China has closed its first case of a company suing the Shenzhen Stock Exchange due to its rejected initial public offering application after the nation implemented a streamlined registration-based system for listings in February last year.

The Shenzhen Intermediate People's Court recently ruled that the bourse's termination of the plaintiff's listing review complied with regulations, Yicai learned. The court did not disclose the name of the IPO-hopeful.

The company had been dissatisfied with a decision of the ChiNext listing committee. The committee had deemed the firm's disclosure of a CNY14 million (USD1.9 million) supplier loan and the related internal control system insufficient.

After the trial, the court discovered the firm's failure to disclose certain matters violated the basic requirements for a public issuance of stock. Those include that "the issuer's disclosed information must be true, accurate, complete, and free from any false records, misleading statements, or significant omissions." The chairman and actual controller had directly participated in coordinating the debated matter.

The court also turned down the firm's claim of outdated data. Financial reporting is not limited to three-year cycles, the court said, adding that the loan was secured in December 2018 which falls within the scope of the prospectus.

Although the ruling did not disclose the name of the firm, Yicai found out that Hongxing Meiling Dairy, a producer of goat milk powder that planned an IPO on the ChiNext in 2019, bears a striking resemblance to the plaintiff. In May 2022, Meiling's IPO application was rejected during a review meeting. The SZSE said that the listing committee had inquired about matters including a supplier lending money to a distributor.

In December 2018, Wang Baoyin, the actual controller of Meiling, coordinated with a supplier to transfer a loan of CNY14 million to a distributor which then used these funds to purchase goods from Meiling.

The listing committee had requested Meiling to explain its rationale behind the loan and also asked the above-mentioned distributor to shed light on a jump in sales that month.

Editor: Emmi Laine