Shares in Hoshine Silicon Industry dipped today as a dispute over a cash bonus for a past executive took a turn for the worse when China’s largest industrial silicon producer received a warning letter from the Shanghai Stock Exchange.
Hoshine’s share price [SHA:603260] closed down 1.4 percent at CNY56.50 (USD7.80) today. Earlier in the day it sank 2.6 percent to CNY57.33.
Although the contents of the letter were not made public, regulators generally only step in when a company is suspected of violating laws and regulations.
The dispute between Hoshine’s former General Manager Fang Hongcheng and Chairman Luo Liguo spilled over into the public domain yesterday when Fang’s wife, Sun Lichen, stated on WeChat that her husband had been forced to go to court to safeguard his own rights because Luo reneged on an agreement to grant Fang a cash reward after the Ningbo, eastern Zhejiang province-based company went public in 2017.
Fang has won all the lawsuits related to this case at the Hangzhou Arbitration Commission, Hangzhou Intermediate People’s Court, two levels of courts in Cixi and Ningbo as well as a court in Pinghu, also in Zhejiang province, Sun said.
Hoshine responded with a statement today, saying that although Luo agreed to reward Fang for his long-time service to the company with a cash reward equivalent to the appreciation of a certain amount of equity once the company went public, this was only on the condition that he served another five-year term at the company, that during his tenure no damage was done to the firm’s profit and if there is no direct competition with Hoshine.
The agreement was based on the transfer of a certain amount of equity, but Fang never paid for the shares, and the equity never changed hands, Hoshine said. Fang left the company in 2018 and subsequently, Hoshine discovered that Fang had allegedly breached trust and acted illegally, damaging the company’s interests. These matters were reported to the police and Luo determined that Fang would not get his bonus, it added.
Fang took Hoshine to the Hangzhou Arbitration Commission which ruled in his favor last year, stating that Fang should be granted 40 percent of the amount agreed according to his actual time at Hoshine. Luo refused and is currently appealing the ruling.
In turn, Hoshine is taking Fang to court for alleged embezzlement. Hoshine was informed by police last year that Fang had allegedly conducted graft during his tenure at the company, it said. A court case was opened against Fang today at the People’s Court in Pinghu, accusing him of receiving a bribe as a non-government employee.
However, Sun publicly accused Luo on Wechat of intimidating a senior official in the municipal government by threatening to relocate his company, so as to intervene in the judicial proceedings and frame Fang.
Hoshine’s net profit halved in the first three quarters from a year ago to CNY2.2 billion (USD300.6 million) as the price of raw materials soars and silicon prices tumble, but revenue climbed 8.8 percent to CNY19.9 billion (USD2.7 billion). Hoshine has external guarantees which are worth more than its net assets.
