Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(incorporated in the Cayman Islands with limited liability)

(Stock code: 8116)

RESULTS OF INTERNAL CONTROL REVIEW

Reference is made to the Company's announcements dated 5 October 2018, 16 November 2018, 8 February 2019, 8 May 2019 and 2 August 2019 in relation to, among others, the Group's operation of the P2P online platform and loan facilitation services in China (the "P2P Business") which was acquired by the Group on 28 November 2017. The Company announced on 21 December 2018 the resumption guidance issued by the Stock Exchange to the Company. On 8 February 2019 the Company announced the appointment of Zhonghui Anda Risk Services Limited ("IC Consultant") as an independent consultant to conduct a review on the financial reporting procedure and internal control system of the Group ("Internal Control Review").

RESULTS OF THE INTERNAL CONTROL REVIEW

The scope and results of the Internal Control Review are summarised below.

Purpose and scope of work

The purpose of the Internal Control Review was to help the Directors assess whether the financial reporting procedures and internal control system established by the Group were effectively implemented, so as to enable the Directors to assess whether the Company complied with the obligations stipulated in the GEM Listing Rules. Simply put, the Internal Control Review will assess whether the Group's financial reporting procedures and internal control system:

  1. achieve their original purposes in design;
  2. were implemented; and
  3. were functioning effectively and achieved their original purposes during the Review Period.

1

According to the above purpose, the IC Consultant has conducted a review of the financial reporting procedures and internal control measures of the Group at the corporate level and in respect of the main operating procedures of all of the Group's operating subsidiaries except the OPCO. The OPCO has completely ceased operations since the formal investigation and intervention by the Public Security Bureau of Chengdu and other PRC government authorities. The Company has not been able to contact the directors of OPCO since around November 2018, and all documents concerning OPCO have been seized by the Public Security Bureau of Chengdu for investigation. As a result, the IC Consultant has not been able to conduct a review on OPCO. References to the "Group" in this announcement do not include the OPCO.

The scope of the Internal Control Review is summarised as follows:

  1. read relevant policies and procedures and discuss them with the management to understand how these control procedures were implemented during the Review Period;
  2. consider and assess whether these control procedures were effective in design and implementation at some point during the Review Period, interview relevant persons in charge and managers, read relevant policies and procedures, consult meeting minutes, reports, organisational charts and other supporting documents, and perform walk-through tests and substantive tests of documents (the number of samples depends on the number of transactions);
  3. notify the Company of any material weaknesses and deficiencies in the design and implementation of the control procedures;
  4. explain the weaknesses and deficiencies found in the review process to relevant personnel of the Company and provide recommendations for rectification; and
  5. conduct a follow-up review after the Company has responded on the weaknesses and deficiencies pointed out by the IC Consultant or has taken relevant remedial measures and issue the final review report.

2

Summary of major internal control issues

Set forth below is a summary of the major internal control issues identified by the IC Consultant in the Internal Control Review, their corresponding rectification recommendations and the progress of implementation of the remedial measures.

Rectification

Progress

recommendations

of implementation

Major internal control issues

of IC Consultant

of remedial measures

Corporate Level - Compliance with the Corporate Governance Code and Corporate Governance Report in Appendix 15 to the GEM Listing Rules

1. The Company's chairman did not hold a meeting with

n o n - e x e c u t iv e d i r e c t o r s (including independent non- executive directors) without the attendance of executive directors in accordance with Code provision A.2.7 of the Corporate Governance Code.

The Chairman shall hold at least one meeting with independent non-executive Directors each year without the attendance of executive Directors.

The Company will arrange for the chairman to meet with independent non-executive Directors at least once a year since 2019 without the attendance of executive Directors.

2. T h e C o m p a n y d i d n o t disclose the updated terms of reference of its Audit Committee on the websites of the Stock Exchange and the Group after the amendment to code provision C.3.2 of the Corporate Governance Code which came into effect on 1 January 2019.

T h e C o m p a n y

s h o u l d Implemented

publish the updated terms

of reference of its Audit

Committee on the

websites

of the Stock Exchange and the Group, specifying that a former partner of the auditing firm currently engaged by the Company shall not serve as a member of the committee for a period of two years from the date of the person ceasing:

  1. to be a partner of the firm; or
  2. to have any financial interest in the firm, whichever is later.

3

3. T h e C o m p a n y d i d n o t disclose the updated terms of reference of its Nomination Committee on the websites of the Stock Exchange and the Group after the amendment to code provision A.5.5 of the CG Code which came into effect on 1 January 2019.

T h e C o m p a n y

s h o u l d Implemented

disclose the updated terms of

reference

of its

Nomination

Committee on

the

websites

of the Stock Exchange and

the Group. Where the Board

proposes a resolution to

elect an individual as an

independent non-executive

D i r e c t o r a t t h e g e n e r a l

meeting, it should set out in

the

circular to

shareholders

and/or explanatory

statement

accompanying the

notice of

the relevant general meeting:

(a)

t h e

p r o c e s s

u s e d

f o r i d e n t i f y i n g t h e

i n d iv i d u a l a n d w h y

t h e B o a r d b e l i ev e s

the

individual

should

b e e l e c t e d a n d t h e

reasons why it considers

the

individual

to be

independent;

(b)

i f

t h e p r o p o s e d

i n d e p e n d e n t

non-executive

Director

will

be holding

his/her

seventh (or more) listed

company directorship,

why the Board believes

the

individual

would

still be able to devote

sufficient

time

to the

Board.

  1. the perspectives, skills and experience that the individual can bring to the Board; and

(d) h ow t h e

i n d iv i d u a l

contributes

to diversity

of the Board.

4

Corporate Level - Information and Communication

4. An analysis

of the basic

f r a m e w o r k o f i n t e r n a l

u p w a r d a n d d o w n w a r d

c o m m u n i c a t i o n s h o w e d

t h a t n o D i r e c t o r o f t h e

Company served as the legal

representative or a director of

OPCO. They did not directly

participate in OPCO's daily

operations

and other matters

that were not subject to

approval

of

the Company.

Although

the

then internal

controller of OPCO provided verbal report on business development to the Company, no written regular work report and work plan were provided.

The Company should require each of its major subsidiaries incorporated in the PRC to arrange for at least one Director or designated person of the Company to serve as its director, and to convene quarterly board meetings to review quarterly business performance, financial data and compliance issues.

For a subsidiary incorporated in the PRC and expected to constitute part of the Group's principal business, the Company will arrange for at least one Director or designated person to serve as a director of the s u b s i d i a r y, a n d r e q u i r e the subsidiary to convene quarterly board meetings to review quarterly business performance, financial data a n d c o m p l i a n c e i s s u e s . The relevant requirements have been incorporated in the Management Measures for Corporate Information Communication. In addition, the Company has drawn up a List of Major Issues Requiring Reporting which sets out at least 25 major issues required to be reported. Each subsidiary is required to fill out the list each quarter to confirm whether any major issues occurred during the past quarter.

5. The Company failed to meet the requirements of Rule 18.79 of the GEM Listing Rules as it did not make a preliminary announcement of results for the nine-month period ended 30 September 2018, nor did it publish such results within 45 days after the end of such period.

T h e C o m p a n y s h o u l d p u b l i s h t h e p r e l i m i n a r y announcement of results for the nine-month period ended 30 September 2018 as soon as possible to meet the requirements for disclosure of financial information under the GEM Listing Rules.

T h e C o m p a n y w i l l p u b l i s h t h e p r e l i m i n a r y announcement of results for the nine-month period ended 30 September 2018 u p o n c o m p l e t i o n o f t h e investigation into relevant issues of OPCO, so as to meet the requirements for d i s c l o s u r e o f f i n a n c i a l information under the GEM Listing Rules.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

  • Original document
  • Permalink

Disclaimer

China Fortune Investments (Holding) Limited published this content on 30 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 October 2019 14:46:03 UTC