Hall of Shame

Consumer Staples

Asian Citrus (73 HK)

Year: 2016

ASIAN CITRUS HOLDINGS LIMITED is a Hong Kong-based investment holding company principally engaged in agricultural businesses. The Company operates through two segments. Agricultural Produce segment is engaged in the planting, cultivation and sales of agricultural products. Processed Fruits segment is engaged in the manufacture and sales of fruit juice concentrates, fruit purees, frozen fruits and vegetables. The products of the Company include pineapple juice concentrates, mango purees, frozen mangos, fertilizers, packaging materials and pesticides, among others.  It listed on the Hong Kong Exchange in November 2009.

Problems began for Asian Citrus after two of its employees apparently claimed to have identified possible errors in a financial report due to be published for the year to June 2016. In addition, the finance manager of some of Asian Citrus's Chinese subsidiaries also wrote to the company's auditors alleging that certain balances in the internal records of certain customers or suppliers do not correspond to the internal records of the group.

HLB Hodgson Impey Cheng Limited, the auditors of the Company, reported that it had received written correspondences sent by a finance manager.  He asserted that he was acting on behalf of Man Guifu, who was (1) a minority shareholder, director and general manager of Beihai Perfuming Garden Juice Co., Ltd., a PRC subsidiary; and (2) holder of positions in some other PRC subsidiaries.  In the correspondences, it was indicated that certain amounts or balances in the internal records of certain customers and suppliers did not correspond to the internal records of Hepu Perfuming Garden Food Co., Ltd.  It was claimed that there were inaccuracies in the books and records of certain subsidiaries. Also provided to the Auditors were documents purporting to be copies of bank statements for the period from 1 January 2016 to 30 June 2016 of Lucky Team Biotech Development (Hepu) Limited, a PRC subsidiary of the Company.

Furthermore, the Company was made aware of a court order in the PRC requiring Tianyang Perfuming Garden Food Industrial Co. Ltd., another PRC subsidiary, to repay a loan of RMB17 million and the interest in arrears.  Based on the court documents received, Tianyang Perfuming Garden had entered into a loan facility on 1 June 2016, for RMB17 million with interest rate of 6% per annum. The loan and the interests were due for repayment.  Tianyang Perfuming Garden had also pledged two pieces of land as security but such pledge had not been registered with the PRC authorities.  The board of directors of the Asian Citrus had made enquiries with Tianyang Perfuming Garden for information related to this loan, but Tianyang Perfuming Garden did not respond or cooperate. Asian Citrus had also instructed its PRC legal advisers to attend the office of Tianyang Perfuming Garden to exercise its shareholders’ right and make enquiries. Nevertheless the management of Tianyang Perfuming Garden refused to cooperate

Shares were suspened on Sept. 29, 2016 and remain suspened (Feb. 2020.)

Mike Knowles (AsiaFruits): Asian Citrus hit by fraud allegations, 29 Sep 2016
Morning Star: Asian Citrus Shares Suspended Amid Accounting Allegations (ALLISS), 29 Sep 2016
Asian Citrus: Suspension of Shares, 29 Sep 2016
Asian Citrus: Announcement of the Annual Results (YE Jun 2019)
(See Deconsolidation of subsidiaries, point 2 on page 18)
Asian Citrus: Annual Report YE Jun 2016