(Yicai Global) July 16 -- When the Danyang Yishan Lamp Equipments Manufacture unit of Guangzhou-based light-emitting diode maker Hongli Zhihui Group failed to perform an agreement, its executive not only refused to buy back shares per the contract, but also made off with the company's official seal, injuring a staffer.
This may cause monetary losses to the parent, it announced.
Hongli Zhihui and Danyang Zebo Auto Parts Factory, Yishan Auto Lamp and the executive, Guo Zhiqiang, signed a share transfer agreement on Sept. 25, 2017, per which Hongli paid CNY220 million (USD32 million) for 56 percent of Zebo's shareholding in Yishan.
Guo is an Yishan shareholder and its general manager.
Zebo and Guo pledged that Yishan would net profits of CNY23 million, CNY33 million, CNY53 million and CNY83.5 million in 2017, 2018, 2019 and 2020, respectively, but the company lost CNY34 million last year, and thus could not make good on its annual performance commitment.
Hongli demanded the two buy back the shares as the agreement mandated. After lengthy talks, Zebo Partners and Guo ultimately refused to do so, however.
Guo then called a Hongli staffer to Yishan's office on July 12 and violently wrested the company's official seal from the employee, thereby inflicting injuries.
If Guo improperly uses the official seal, this may cause the company losses. Hongli is now the largest shareholder of Yishan and thus may also incur damages, it said in a July 12 statement, but without specifying amounts.
Yishan will have the seal re-engraved as soon as possible and the unit will reject any contract, or any other legally-effective document stamped with it during its absence, it announced.
In an unrelated case, Hangzhou-based Fuxin Electronics also sued Yishan over a default in a payment for goods worth about CNY80 million and seized equipment worth that amount, affecting Yishan's cash flow and normal operations, per the announcement.
Hongli's shares [SHE:300219] have thus far fallen 8.10 percent today to CNY5.79 (USD0.84 cents), trading between CNY5.68 and CNY5.96.
The parent is headquartered in Guangzhou and it produces light-emitting diode packaging, LED automotive lighting and vehicle networking. The firm rang up total operating income of CNY4 billion last year in an annual 8.2 percent rise. Net profit attributable to owners of the parent was CNY210 million in a 41 percent yearly drop. It placed on Forbes Asia's Best Under a Billion list last year but fell off it this year.
Yishan is an auto lights maker based in Danyang in China's eastern Jiangsu province. It makes headlamps, rear lamps, reading lamps, centralized control lamps, molds and electronic fuel injection systems.
Editor: Ben Armour