Zhonghe Co., Ltd. (“Zhonghe”), the first A-share company to be listed in Putian, Fujian Province, delisted its shares in May 2019 and was then listed on the National Equities Exchange and Quotations. With textile printing & dyeing and new energy lithium batteries as its two primary businesses, Zhonghe later fell into serious operating difficulties and a debt crisis due to capital chain ruptures. On June 30, 2022, the Intermediate People’s Court of Putian City ruled to accept the application for the reorganization of Zhonghe in accordance with the law, and appointed JunHe’s Guangzhou office (“JunHe”) and Fidelity Law Firm as the reorganization administrators under the leadership of JunHe’s Ms. Wang Wei. On September 30, 2022, the Intermediate People’s Court of Putian City ruled to substantially consolidate and reorganize Zhonghe and three other companies because their assets and debts significantly overlapped.
Zhonghe and the other three companies had assets of RMB 1.18 billion and liabilities of more than RMB 4 billion. They had about 1,800 creditors and 37,000 shareholders. Zhejiang Guocheng Holding Group Co., Ltd., as the reorganization investor, contributed capital in cash to pay Zhonghe’s debts and acquire part of its equities. According to the draft reorganization plan, the new shares to be issued in connection with the capitalization of capital reserves will be allotted to all shareholders, and all debts including ordinary debts will be fully paid in cash. All debts will be fully paid in cash in its reorganization, a rare occurrence in recent years. On April 21, 2023, Zhonghe’s second creditors’ meeting & investor meeting was held to vote on the draft reorganization plan. 100% affirmative votes were cast by a group of secured creditors, a group of employee creditors and a group of tax creditors in terms of both the number of creditors and the amount of debts owed to such creditors, and 96.30% affirmative votes were cast by the group of ordinary creditors in terms of the number of creditors and 96.09% in terms of the amount of debts owed to such creditors. In the investor group, the shares held by the investors voting for the draft reorganization plan represented 95.69% of all voting shares held by the investors attending the meeting. This is one of the few cases in which the draft reorganization plan of a large reorganization project has been approved by an overwhelming vote in favor of it. On April 24, 2023, the Intermediate People’s Court of Putian City ruled to approve Zhonghe’s draft reorganization plan.
After Zhonghe’s reorganization plan is fully implemented, its financial condition will be fundamentally improved, its ability to continue as a going concern will be enhanced, and the actual value of its shares will be increased, with the legitimate rights and interests of its creditors being protected to the greatest extent. Zhonghe’s core asset is the equity interest held by it in Marcon Jinxin Mining Co., Ltd. which is primarily engaged in lithium mining, and a new energy lithium battery business will be the focus of Zhonghe’s future strategic development. With the accelerated implementation of China’s “dual carbon” policy and a global trend for carbon neutrality, the new energy industry will witness great development. According to the New Energy Vehicle Industry Development Plan (2021-2035) formulated by the General Office of the State Council, pure electric vehicles will become the mainstream of new car production and sales in China by 2035; in order to build a new industrial ecology, the development of a full value chain of power batteries will be promoted, and enterprises are encouraged to improve their ability to guarantee key resources such as lithium, nickel, cobalt and platinum. This has provided great opportunities and a broad market space for the development of Zhonghe’s new energy lithium battery business.