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Shareholders' Meeting Approves Reorganization Package for Baiwen
This year's second provisional shareholders' meeting for the Zhengzhou Baiwen Co., which opened Sunday morning, endorsed a framework package to reorganize companies on the brink of bankruptcy.
But analysts said it is still possible for the plan to be overruled in the next provisional meeting, which will also explore the details of the plan.
Based in Zhengzhou, the capital of Henan province, the state-owned Zhengzhou Baiwen Co., a distributor of household goods, branched into a national retail network. In April 1996, the company became the first enterprise from the city to be listed on the stock exchange. However, Baiwen created false accounts to meet listing requirements.
Baiwen reported a loss of 115 million U.S. dollars in 1999, the biggest loss for a listed company in China. Thus, creditors tried to liquidate the firm.
Baiwen's case created an awareness for the need of bankruptcy mechanisms for listed companies in China.
The China Securities Regulatory Commission (CSRC) announced it was to investigate the company. A government investigation team was dispatched to Zhengzhou to investigate the company's books.
Analysts said that stock market regulators, seeking to increase transparency on the nation's stock exchanges, are placing loss-making listed firms under stricter scrutiny.
Listed firms reporting losses for two years or more will now be required to release financial information every three months instead of every six months.
Twenty-nine of the nearly 1,000 firms listed on China's stock markets in Shanghai and the south China city of Shenzhen run at losses, and will be required to meet stricter disclosure standards.
The Baiwen case and others "involving improper information disclosure rang an alarm for securities regulators," Zhou Qinye, director of the Shanghai Stock Exchange's listing department, said.
Starting next year all listed firms are required to post their financial reports on the Internet, Zhou added.
The government hopes that stricter disclosure and other regulatory improvements will build confidence in the stock markets and encourage ordinary Chinese to invest some of the 6 trillion yuan (725 billion U.S. dollars) held in savings accounts.
More than one third of the shareholders agreed to the plan.
According to the plan, Baiwen is to be merged with Shandong Sanlian, a firm based in Jinan, capital of the eastern province of Shandong.
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