江苏恒顺醋业股份有限公司对外担保制度详解：对投资者的深远影响

English Version

Jiangsu Hengshun Vinegar Co., Ltd. External Guarantee System Detailed: Key Points for Investors

Jiangsu Hengshun Vinegar Co., Ltd. (“Hengshun Vinegar”) recently released its latest “External Guarantee System”. This new system aims to regulate guarantee activities by the company and its subsidiaries, strengthen risk management, and safeguard corporate assets. The following is an in-depth interpretation of the document, focusing on aspects of concern to investors and shareholders, and factors that could potentially impact share prices.

I. Definition and Application Scope of External Guarantee

• “External guarantee” refers to the company acting as a third party to guarantee a debtor’s obligations to a creditor, including various forms such as suretyship, mortgage, and pledge.
• Guarantees for the company’s own debts are not covered by this system.
• This regime applies to the company and its controlled subsidiaries.

II. Stringent Approval Process and Authority

• All external guarantees must be approved by the Board of Directors or the Shareholders’ Meeting; none may be provided without approval.
• Certain major guarantees (e.g., single guarantee amount exceeding 10% of audited net assets, guarantees for entities with a debt ratio above 70%, guarantees for related parties, etc.) must be submitted to the Shareholders’ Meeting for approval.
• For guarantees to related parties, approval by two-thirds or more of non-related directors is required, and controlling shareholders, actual controllers or related parties must provide counter-guarantees.
• Unapproved related guarantees must be terminated in advance.
• The company sets up an advance quota mechanism for guarantees to subsidiaries, joint ventures, or associates, with quotas subject to approval and not to be exceeded at any time.

III. Information Disclosure and Transparency Requirements

• All Board or Shareholders’ Meeting-approved external guarantees must be promptly disclosed on the Shanghai Stock Exchange and relevant media, including total guarantees and details for subsidiaries.
• For guarantees meeting disclosure thresholds, if the guaranteed party fails to repay within 15 trading days or is bankrupt, timely disclosure is mandatory.
• The Board will annually examine all guarantee activities and disclose results, with independent directors issuing a special statement and independent opinion on guarantee compliance in the annual report.

IV. Strict Selection and Risk Management of Guaranteed Parties

• The guaranteed party must be operating and financially sound, able to provide effective counter-guarantees, and have debt repayment capacity.
• The financial department manages and investigates guarantee applications, conducts due diligence, and continuously monitors the guarantee party’s operation and finance.
• Debt extensions are considered new guarantees, requiring re-approval.
• If the guaranteed party’s condition worsens, the Board must act promptly.
• During the guarantee period, the finance department must closely monitor cash flow and debt repayment, reporting and advising on any emerging risks.

V. Counter-Guarantee and Loss Recovery Mechanisms

• Counter-guarantees are mandatory and must be recognized by the Board, with the provider having actual ability to assume liability.
• Assets with pre-existing guarantees or restrictions are not accepted as collateral for counter-guarantees.
• If the guarantee is called, the company may immediately initiate recourse procedures and participate in bankruptcy distribution.
• If losses are caused by controlling shareholders or related parties, the Board must pursue recovery and take legal measures.

VI. Responsibility for Violations and Protective Measures

• Upon discovering illegal guarantees, the company must disclose and take action to correct or eliminate the violation, reduce losses, and hold those responsible accountable.
• If controlling shareholders or actual controllers misappropriate company funds or assets, the Board must immediately recover assets and take legal action to protect the company and all shareholders’ interests.

VII. Potential Investor Impacts and Price-Sensitive Points

• High guarantee thresholds, strict approval, and frequent disclosures help reduce financial risk and boost investor confidence.
• Failures in execution regarding guarantees to controlling shareholders and related parties could cause major losses, regulatory penalties, and directly affect market value and credit rating.
• Future large or frequent guarantees, or defaults by guaranteed parties, could materially and negatively impact the company’s funds, profitability, and share price.
• Violations will trigger mandatory disclosures and liability, potentially causing market volatility.

VIII. Other Points of Note

• This system takes effect upon Shareholders’ Meeting approval and will be revised in line with future legal or corporate charter changes.
• The Board retains the right of interpretation.

Disclaimer: This article is an interpretation of Hengshun Vinegar’s published “External Guarantee System” and does not constitute investment advice. Investors should make decisions based on their own risk tolerance and comprehensive information. In case of discrepancies with actual company announcements or laws, the latter shall prevail.