[Zhenzhuo HK Stock Expert] Hai Xia Petrochemical (00852.HK) Advances on the Path to Resumption of Trading Through Rectification Measures

In the Hong Kong stock market, it is not uncommon for companies to be suspended from trading due to failure to disclose financial reports on time. Straits Petroleum & Chemical Corporation (00852.HK), currently under suspension, $STRONG PETRO (00852.HK)$ is actively advancing its relisting process through systematic corrective measures. Last Friday’s announcement revealed that the company has made significant progress in governance and strengthening its internal control systems.

Court documents explicitly disclose the parties involved in the litigation and the responsibilities of the directors.

According to a disclosure by Straits Petroleum & Chemical Corporation on October 17, the company's indirectly wholly-owned subsidiary, Straits Petrochemicals Co., Ltd., has legally filed a lawsuit with the High Court of the Hong Kong Special Administrative Region against former directors Yao Guoliang and Tan Xiao to pursue legal accountability. The announcement noted that the two individuals allegedly breached their fiduciary duties as directors during crude oil transactions at the end of 2024 and are liable for economic compensation of approximately RMB 37 million.

The above announcement refers to the public court document (Summons in Case No. HCA 1915/2025 of the High Court of Hong Kong). The plaintiff is Straits Petrochemicals Co., Ltd., a wholly-owned subsidiary of Straits Petroleum & Chemical Corporation. The first defendant, Yao Guoliang, served as a director of the plaintiff from November 4, 1999, to January 25, 2025; the second defendant, Tan Xiao, held the position of director from November 11, 2024, to January 25, 2025. Other directors, including Wang Jiansheng and Ma Yi, also ceased their duties on January 25, 2025. The court document clearly states that, as company directors, the defendants must strictly fulfill their fiduciary duties, which include acting with integrity and loyalty in the best interest of the company, managing assets carefully, exercising powers only for proper purposes, and demonstrating reasonable skill and diligence as required by law.

Key events related to the crude oil transactions revealed.

According to the summons and statement of claim, in September 2024, Yao Guoliang signed multiple crude oil purchase agreements and supplementary contracts on behalf of the company, involving transactions of 1.9 million barrels (±5%) of crude oil with counterparties including Shandong Energy Group International Trade Development Co., Ltd. and Upower Energy Company Limited. However, the tanker “ΗCONSTANCE” did not actually arrive at the Port of Santana in Brazil, yet the defendants submitted forged quality certificates and certificates of origin, using false documents to fraudulently obtain letters of credit issued by the Guangdong Branch of the Agricultural Bank of China, successfully withdrawing RMB 379 million.

Notably, between December 30, 2024, and January 23, 2025, the defendants convened five fictitious board meetings without notifying other directors, transferring substantial funds to Strong Petroleum Singapore Pte Ltd, an associated company in Singapore, and subsequently repaying Shandong Energy under the guise of “contract refunds.” All these meetings were conducted without notifying other directors and are legally invalid resolutions.

Previously, on February 10, the company announced that Yao Guoliang had resigned from his position as Chief Executive Officer, and declared the termination of Tan Xiao’s role as Co-Chief Executive Officer due to a “complete breakdown of trust.” The company emphasized that although no formal resignation confirmation was received, based on the principle of prudence, his resignation was deemed effective as of January 24.

An independent investigation clears allegations against former CFO and other senior executives.

HaiXia Petrochemical once issued an announcement on the evening of December 26, 2024, holding the former Chief Financial Officer (CFO) Guan Peishan accountable. After nearly a year of in-depth investigation, the company published the results of the independent forensic investigation on September 30, 2025. Following a review by a professional team from an internationally renowned accounting firm of all expenditure records from 2020 to 2024, it was confirmed that Guan Peishan, Wang Jiansheng, and Wang Peng did not intentionally misappropriate assets, and there was no evidence to support the double indemnity claims. Pages 6 to 7 of the announcement provide a detailed list of the complete chain of evidence demonstrating compliance with the relevant expense declaration and approval processes.

Remedial measures pave the way for resumption of trading

Public data shows that HaiXia Petrochemical achieved revenue of HKD 895 million in the first half of 2024, representing a significant year-on-year increase of 83.02%; net losses narrowed to HKD 9.37 million, with the loss attributable to shareholders amounting to HKD 8.75 million. Despite governance challenges, the company’s fundamentals remained relatively robust.

HaiXia Petrochemical, which is currently suspended from trading, is systematically advancing its rectification efforts in strict accordance with the Hong Kong Stock Exchange's resumption guidelines: from disclosing the results of the independent forensic investigation on September 30 to officially initiating legal accountability proceedings against former executives on October 15, a series of transparent and standardized remedial actions have demonstrated the company’s determination to rebuild governance.

As the rectification efforts continue to be implemented, the company is expected to meet the resumption conditions as soon as possible, thereby restoring investor confidence. Subsequent developments will focus on updates regarding the Hong Kong Stock Exchange’s resumption review process and the effectiveness of internal control system optimizations.

(Written by Li Huifen, Greater Bay Area Family Office Association) (The author does not hold any of the aforementioned stocks)

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