Hong Kong Exchanges and Clearing Limited’s subsidiary, The Stock Exchange of Hong Kong Limited (HKEX), has taken disciplinary action against three former executive directors of Jiayuan Services Holdings Limited following findings of extensive unauthorised fund movements and severe governance failures.

Between January 2021 and December 2022, Jiayuan Services transferred approximately RMB1.99 billion to entities controlled by its founder and then-controlling shareholder, Shum Tin Ching, despite assurances at IPO that a previously centralised cash-pooling arrangement had ceased. Only RMB1.35 billion was returned, leaving a net unrecovered balance of about RMB0.64 billion that has since been written off.

The transactions—executed via 398 separate payments and including IPO proceeds—were ordered by Shum and processed by the company’s finance resource centre without any board approval. To prevent detection during statutory audits, forged bank statements and inflated cash records were contemplated; former chairman, CEO and executive director Zhu Hongge approved documentation supporting these concealment measures in March 2023.

Financial repercussions were immediate: • Cash and bank balances fell from RMB633 million at end-2021 to RMB24 million at end-2022. • Shareholders’ equity swung from a RMB627 million surplus to a RMB34 million deficit over the same period. • Auditors later discovered that reported 2022 cash balances were overstated by 95%.

Internal investigations completed in September 2024 cited material control deficiencies, notably continued dominance of the finance function by Shum’s “Headquarters” vehicle and absence of an independent internal audit department—issues repeatedly highlighted but unaddressed by the directors.

Sanctions: 1. Zhu Hongge – Director Unsuitability Statement and public censure; deemed unfit to hold any directorship or senior management role in Jiayuan Services or its subsidiaries. 2. Bao Guojun – Prejudice to Investors’ Interests Statement and public censure. 3. Pang Bo – Prejudice to Investors’ Interests Statement and public censure.

The three former directors admitted breaches of Listing Rules 3.08 (fiduciary and duty-of-care obligations) and, in Zhu’s case, 3.09B (duty to procure compliance). HKEX emphasised that these penalties apply solely to the sanctioned individuals and do not preclude further enforcement actions against other parties.