Hall of Shame

Sihuan Pharm (460 HK)

Sihuan Pharmaceutical Holdings Group Ltd. researches and develops cardiocerebral vascular drugs in China. The Company drugs address needs in the areas of anti-infective, metabolism, cardiovascular system, oncology and nervous system.

In Mar 2015, the company announced that the publication of 2014 annual results will be delayed, and the trading was suspended. Allegations related to inflated selling price, payments made to distributors and commercial bribery were made against the company, and an independent investigation was conducted by the Audit Committee. 2014 Results were published in Aug 2015, but the investigation revealed problems in the accounting practices of the company, and adjustments were made to the financial statements.[1]

A non-executive director of the company was arrested by the ICAC on 27 Nov 2015 in connection with a bribery investigation. He was released without any charges.[2]

The auditors, PWC, resigned in Jan 2016[3], issuing a disclaimer opinion saying that they were unable to obtain sufficient audit evidence to provide opinion on the financial statements.[4] Sihuan announced a change of auditor again in Jul 2016.

Share prices fell more than 50% when it resumed trading on 29 Feb 2016.

[1] Sihuan Pharmaceutical: Fulfilment of all Resumption Conditions, 26 Feb 2016

[2] Sihuan Pharmeceutical: Announcement, 1 Dec 2015

[3] Sihuan Pharmaceutical: Change of Auditor, 18 Jan 2016

[4] Sihuan Pharmaceutical: Annual Report 2013;  Annual Report 2014 - Auditor's disclaimer of opinion on P.85

Fidelity: Sihuan Pharmaceuticals; a corporate governance case study, May 2017