Case Study On The Problems Of Funds Occupation Of Controlling Shareholders Of *ST HUAYI Electric Co.,Ltd.

In recent years,the embezzlement of funds of listed companies has occurred frequently in China’s securities market.It is found that most of the companies whose funds have been occupied have some problems,such as over concentration of equity,failure of internal control,unreasonable corporate governance structure and so on.At the same time,the legal department is also actively improving the laws and regulations in order to restrain the controlling shareholders of listed companies.Although many parties are making efforts to prevent this kind of behavior,the effect of prevention and governance is still not optimistic.Therefore,it is very important to study the problem of controlling shareholders’ illegal occupation of funds,analyze the reasons for the implementation of the illegal behavior and the negative impact on the company,and put forward practical and targeted suggestions and countermeasures,both for the company itself and for the future development of the whole capital market.The case company selected in this paper is HUAYI Electric Co.,Ltd.At the end of 2019,the company announced that there were problems of fund occupation and related parties’ illegal guarantee within the company.Because the company suffered losses in 2018 and 2019 for two consecutive years,the company’s stock was implemented delisting risk warning and became * ST stock.Based on the principal-agent theory,internal control theory and information asymmetry theory,this paper uses the methods of literature analysis,case analysis and financial index analysis to analyze and study the specific problems of * ST HUAYI,and divides the whole article into four chapters.In the introduction part,the research background and significance of this paper are explained,and the existing literature and related theories related to controlling shareholders’ capital occupation are sorted out.The second chapter gives a brief introduction to the situation of * ST HUAYI Company from three aspects of company profile,ownership structure and governance structure,and combs the development process and means of this violation.The third chapter focuses on the analysis of the causes of violations and the adverse effects of violations.Through consulting relevant information,this paper summarizes the reasons into the following aspects,among which the internal reasons mainly include the dominant position of major shareholders,the failure of internal control of the company,the massive pledge of controlling shareholders’ equity and the failure of the supervisory function of the board of supervisors to give full play to its role.The external reasons mainly include the weak supervision of CSRC,the low cost of violation and the lack of supervision function of independent audit institutions.With the help of relevant financial data indicators,this paper analyzes the company’s solvency,operating capacity,profitability,financing capacity and future development trend,evaluates the adverse impact of capital occupation on the company’s production and operation,and analyzes the impact of capital occupation on stakeholders in combination with the stock price trend.The fourth chapter,according to the actual situation of * ST HUAYI,combined with the reasons for the implementation of violations,puts forward feasible and targeted suggestions and countermeasures from the company level and regulatory level.At the same time,we should strictly implement the internal control system,improve the internal governance structure,and consider the introduction of external supervisors,so as to better prevent the recurrence of such incidents.From the regulatory level to improve regulatory measures and increase penalties,so that the existing rules and regulations can play a good warning role.At the same time,we should improve the protection mechanism of small and medium shareholders,reduce the cost of protecting the rights of small and medium shareholders and unnecessary litigation procedures,and improve it at the legal level.We should consider carrying out all-round supervision,taking advantage of the supervision role of network media and independent review organizations to prevent such violations.At the same time,improving the audit quality can also effectively prevent violations.