Two independent directors demand the cancellation of the extraordinary shareholder meeting to compete for the final battle of Zhongju High tech. On the eve of the Baoneng General Manager's 5-day resignation, independent | director | shareholder meeting

On the eve of the extraordinary shareholder meeting, the internal conflict between the former major shareholder of Zhongju High tech Industrial Co., Ltd., known as the "second share of soy sauce", Dongbao Energy, and the new shareholder, became increasingly anxious.

Firstly, there has been another change in the management of Zhongju High tech, with Deng Zuming, the general manager of the Baoneng department who has only been in office for 5 days, resigning.

At the same time, in response to Li Gang and Qin Zhihua, independent directors of Zhongju High tech, requesting the cancellation of the extraordinary shareholders' meeting, Zhongshan Torch Industrial Group, a state-owned shareholder of Zhongju High tech, issued a statement stating that the two independent directors have lost their "objective and neutral stance".

On July 23, Zhongju High tech announced that the board of directors of the company received Deng Zuming's resignation report on July 22, 2023. Due to personal reasons, Deng Zuming resigned from the position of General Manager of the company. After resigning, Deng Zuming will not hold any positions in the company or its subsidiaries.

Deng Zuming is the new general manager appointed by Li Cuixu, former general manager of Zhongju High tech, after resigning last week. He will be on duty for 5 days.

On July 17th, Zhongju High tech announced that the company's board of directors received Li Cuixu's resignation report on July 17th, 2023. Due to personal reasons, Li Cuixu resigned from the position of General Manager of the company. After resigning, Li Cuixu will not hold any positions in the company or its subsidiaries.

That evening, Zhongju High tech held the 11th meeting of the 10th Board of Directors and appointed Deng Zuming as the General Manager of the company.

According to public information, Li Cuixu has served as the Vice President of China Southern Glass Group Co., Ltd., another listed company in the "Baoneng" series, and has been serving as the General Manager of Zhongju High tech since June 2019. Deng Zuming also has a background in the "Baoneng Group". He has been working at Baoneng Group since 2012 and has been serving as an assistant to the company's president since March 2022.

On the afternoon of July 23rd, in its statement, Zhongshan Torch Industry Group stated that on July 22nd, Baoneng Holdings Co., Ltd. released a letter from independent directors of Zhongju High tech, Li Gang and Qin Zhihua, to the China Securities Regulatory Commission and Shanghai Stock Exchange requesting the cancellation of the extraordinary shareholder meeting on July 24th through its official WeChat video account.

Zhongshan Torch Industry Group believes that regarding the aforementioned letters from two independent directors, Li Gang and Qin Zhihua, as well as their opinions on recent board discussions, "our company believes that as independent directors of a listed company, they have lost their objective and neutral stance on the aforementioned matters, lack independence, and violate the directors' fiduciary and diligent obligations."

According to the Shanghai Securities News, Qin Zhihua, the independent director of Zhongju High tech, stated that he has issued a notice on the extraordinary shareholders' meeting of Zhongju High tech through non listed company information disclosure channels. He expressed concern about the proposal of the supervisory board of listed companies to hold an extraordinary shareholders' meeting in the absence of a major lawsuit and suggested postponing the meeting.

The major lawsuit mentioned by Qin Zhihua refers to a land dispute that occurred many years ago. On June 20th, Zhongju High tech disclosed the progress of the lawsuit. The Industrial Alliance sued Zhongju High tech for a land dispute that occurred more than 20 years ago and has now received a first instance judgment from the court. Among them, Zhongju High tech will compensate Industrial Alliance for the value-added premium loss of 1.919 billion yuan caused by the inability to deliver 797.05315 acres of land.

Qin Zhihua believes that the current lawsuit against Zhongju High tech in relation to Torch Group has won the first instance, and most of the newly nominated directors come from Torch Group. This is precisely the focus of controversy between the Baoneng Group and Zhongshan Torch Industry Group over the control of Zhongju High tech.

Zhongshan Torch Industry Group stated that for the relevant litigation cases, the court has tried them in accordance with the law and made a first instance judgment. The two independent directors should respect the facts and court judgments. In response to the so-called false lawsuit filed by Zhongshan Runtian, the Industrial Alliance has made a clear statement to clarify the facts and reported its behavior of infringing on the commercial reputation of relevant parties to the public security organs, which has been accepted.

Zhongshan Torch Industry Group said, "The two directors still use this as a reason to request the cancellation of the extraordinary shareholders' meeting, clearly failing to fulfill their fiduciary and diligent obligations as directors."

According to the Shanghai Securities News, Qin Zhihua said that although he was the sole director of Zhongju Hi tech nominated by Baoneng and served as the convener of the Nomination Committee and Remuneration Committee of the Board of Directors, he raised objections on several occasions in the previous discussions on relevant matters of the Board of Directors, especially in terms of executive compensation, management appointment and removal, employee shareholding, etc.

According to the plan, Zhongju High tech will hold an extraordinary shareholders' meeting on July 24th to review the proposal, which includes the removal of four non independent directors including He Hua and the appointment of four non independent directors including Liang Daheng.

Pengpai News previously reported that the four people who were dismissed all have a "Baoneng" background, and most of the four proposed candidates are related to Zhongshan Torch Industrial Group. Zhongshan Torch Industrial Group and the industrial alliance that sued Zhongju High tech are both state-owned enterprises under Zhongshan State owned Assets.

Qin Zhihua believes that in the case where the second trial has not yet been concluded, if the plaintiff company holds the decision-making power of the defendant company, it may put Zhongju High tech at risk of bankruptcy due to litigation compensation.

Zhongshan Torch Industry Group believes that before the extraordinary general meeting of shareholders, regarding the resignation of the general manager, deputy general manager, and board secretary, and the urgent dismissal of the two deputy general managers in charge of finance and in charge of human resources, logistics, administration, and information by the board of directors with a majority of seats held by Zhongshan Runtian, three individuals without any relevant work experience in the main business of the listed company were quickly elected as the core executives of the listed company, including the general manager, deputy general manager, and financial manager. Both independent directors voted in favor, which clearly contradicted their independent opinions on "maintaining production and operation continuity and stability" and lost their professionalism.

Prior to this, the internal competition between the two major shareholders of Zhongju High tech had become increasingly intense.

On the afternoon of July 20th, Zhongshan Runtian issued a condemnation notice on the official website of Baoneng Group, stating that Yao Zhenhua, Chairman of Baoneng Group, visited the headquarters of Zhongju High tech on July 19th to "investigate the production and operation situation", but was "unexpectedly refused entry by security guards.". In the live video posted on the official website of Baoneng, Yao Zhenhua appeared very indignant and angrily rebuked, "I have never seen anything as chaotic as this before.".

On the same day, Zhongju High tech issued a statement on its official website in response to the rejection of Yao Zhenhua's visit to the company's factory area for research. After verification by the security personnel, it was found that the visitors did not make an appointment or present relevant identification documents, and the on-site security personnel did not receive instructions from the company's executives that visitors would enter the factory area.