BIZCHINA / Center |
China gets tougher on misappropriated funds(Xinhua)Updated: 2006-11-11 13:08 Eight ministries of the Chinese government have jointly issued a circular demanding tougher measures against shareholders who have misappropriated funds of listed companies. Local governments and departments must enforce laws and regulations more strictly, said the circular released by China's securities and banking regulators, China's central bank, the administrations of State assets, customs, taxation, industry and commerce as well as the Ministry of Public Security. Listed companies must be urged to disclose information about fund misappropriation, said the circular. Those who are responsible for misappropriated fund should be removed from their posts, said the circular. Criminal suspects involved in fund misappropriation should be prevented from leaving the country, said the circular. In June, China's legislative body adopted an amendment to the criminal code that makes misappropriation of a listed company's funds by controlling shareholders a crime. "The overall situation of misappropriation of funds remains grim, and some companies face great difficulties in retrieving the funds," said the circular. By Thursday, 320 of the companies listed in the Shanghai and Shenzhen stock exchange markets had retrieved all misappropriated funds, while 52 companies had received partial embezzled money. A total of 22.7 billion yuan (2.84 billion US dollars) had been repaid. Meanwhile, 95 listed companies still had 25.6 billion yuan outstanding to their controlling shareholders, making it difficult for the government to achieve the goal of retrieving all appropriated funds by the end of this year. The deadline was set in November 2005, when the State Council approved a plan to improve the country's 1,300 listed companies. The misappropriation of large amounts of funds of listed companies by their controlling shareholders has been a major issue afflicting China's burgeoning stock market. The government considers the problem a detriment to the interests of companies and smaller shareholders and the many reason for reported company losses. In October, stock market regulators investigated the Hebei Baoshuo Co Ltd, a plastic processor and chemical product manufacturer based in North China's Hebei Province. The company revealed that 535 million yuan of its funds had been misappropriated by its controlling shareholder, the Baoshuo Group, to pay for salaries, insurance, and raw materials. (For more biz stories, please visit Industry Updates)
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