HKEX: Disciplinary action taken against C CARBONNEUTRAL (01372) and seven directors

On 3 November, HKEX published a disciplinary action against C CARBONNEUTRAL Development Group Limited (01372) and seven directors. Censure: C CARBONNEUTRAL Development Group Limited (01372); Mr. Di Ling, Executive Director and Chief Executive Officer; Mr. Lu Xiangyong, Executive Director; Mr. Zhong Guoxing, Non-executive Director and Vice Chairman; Mr. Wang Jiashi, Independent Non-executive Director; Mr. Sha Tao, former Executive Director and Chairman; Ms. Lan Haiqing, former Independent Non-executive Director; and Mr. Wang Anyuan, former Independent Non-executive Director. The above directors are further directed to complete training. HKEX's investigation revealed that the company's second interim results and second interim report for the twelve months ended 31 December 2023 significantly overstated its carbon credit assets by HK$58.7 million. As a result, the company's fair value gain on carbon credit assets was overstated by HK$58.7 million, while its loss was understated by HK$58.7 million, as detailed below: The company's report showed that its carbon credit assets as at 31 December 2023 amounted to HK$69.4 million, purportedly representing a year-on-year increase of 680%. However, the actual asset amount was only HK$10.7 million, and the overstated HK$58.7 million was equivalent to 48% of the company's equity value as announced at the time. The company's report also showed that its fair value gain on carbon credit assets for the twelve months ended 31 December 2023 was HK$60.5 million, but the actual amount was only HK$1.8 million. Accordingly, the company's actual loss for that period should have been HK$70.0 million, rather than the reported loss figure of HK$11.3 million, with the loss understated by 519%. The purported year-on-year increase of as much as 680% in the value of the company's carbon credit assets should have drawn the above directors' attention to the accuracy of the relevant data. However, the relevant directors failed to take sufficient steps to review whether the valuation of the relevant assets was appropriate, resulting in the information contained in the company's interim results and interim report being inaccurate or misleading in material respects, in breach of Rule 2.13 of the Listing Rules. In addition, HKEX also investigated the company's prepayment of RMB33.8 million to a service provider in October 2023 and its acquisition of a mainland China company for HK$30 million in March 2024. HKEX found that the company failed to disclose these two transactions in a timely manner, in breach of the requirements of Chapters 13 and 14 of the Listing Rules. Mr. Di Ling and Mr. Zhong Guoxing approved the relevant transactions but misjudged or overlooked the applicable requirements of the relevant Listing Rules involved.