China securities regulator suspects Giti of information disclosure violations

The China Securities Regulatory Commission (CSRC) has decided to file a case against Giti Tire Corporation (Giti Tire Corp). The tyre company is suspected of information disclosure violations. Giti Tire Corp has received an official notification from CSRC. Tyrepress notes a 22 September Shanghai Stock Exchange report detailing measures taken against the company as a result of such violatons: “In the last 12 months, we (the Shanghai Stock Exchange) imposed supervision on (Giti Tire Corp) for similar violations. (Giti Tire Corp) did not make timely rectifications and continued to carry out the same type of violations for a long time, and the circumstances were serious.”

It is reported that the amount of daily related transactions of Giti Tire Corp is relatively large and needs to be approved by the general meeting of shareholders. However, since 2020, the company has continued to conduct daily related transactions several times without approval.

According to the data, Giti Tire Corp held several general meetings of shareholders to consider daily related transaction proposals in 2020 and 2021, but none were passed. The suspicion is that Giti Tire Corp is operating in violation of regulations by conducting a large number of daily related transactions without the approval of the general meeting of shareholders.

An executive of the company said that small and medium shareholders were dissatisfied with the company’s share structure reform plan, which led to the failure of Giti Tire Corp’s 2020 and 2021 daily-related transaction proposal to be approved by the shareholders’ meeting.

The share structure reform of listed companies is a historical legacy of China’s securities market, directly related to the value of stocks held by current shareholders. Over the years, several reform proposals of Giti Tire Corp have failed to pass for various reasons, resulting in reports of dissatisfaction among shareholders.

The daily related transactions are related to the company’s business structure. Giti Tire Corp and its then chairman Li Huaijing defended the company’s actions in a statement presented to the Shanghai Stock Exchange: “Giti Tire Corp’s daily operations inevitably need to continue to use the Giti Group’s brand, R&D technology and sales network, and other resources to maintain operational efficiency and competitiveness. If there is no perfect alternative, Giti Tire Corp’s rash cancellation of daily related transactions may result in serious losses or even the inability to continue operations.”

Giti Tire (China) Investment Co. Ltd is the major shareholder of Giti Tire Corp, holding a 44.43 per cent stake. According to public information, Giti Tire Corp manages one production base in Fujian. From January to September, Giti Tire Corp’s revenue was 921 million yuan (about 109 million pounds, 125 million euros), and the net profit attributable to shareholders of the listed company was 7 million yuan (about 832,000 pounds, 951,000 euros).