Chiho Environmental Group Limited (“Chiho Env”) has disclosed the key findings of an independent forensic investigation led by Ernst & Young Advisory Services Limited into irregularities at three deconsolidated mainland subsidiaries—Yantai Liheng, Yantai Qisheng and Chongqing Zhujin (collectively “the Subject Group Companies”). The work was commissioned to meet Hong Kong Stock Exchange resumption guidance after earlier investigative limitations.
Key quantitative findings
1. Unrepaid intra-group loans • Between May 2018 and January 2023, 25 loan agreements channelled RMB107.93 million from three Hong Kong and PRC units to Yantai Liheng. • As at 31 October 2024, RMB53.29 million of principal and RMB13.39 million of interest—together RMB66.68 million—remained outstanding. • Sixteen of the 18 drawdowns (about RMB104 million) lacked proper corporate approval; several tranches were deliberately split to avoid CEO-level sign-off.
2. Unsubstantiated tax-audit claim Site visits to two Yantai tax bureaus confirmed the only audit on Yantai Liheng ended in March 2021. This contradicts management’s assertion that computers and records were seized in September 2024, a claim used to withhold books from the Group.
3. RMB30 million unapproved bank loans and fund cycling • Yantai Liheng and Yantai Qisheng raised three bank loans of RMB10 million each during June-July 2024 without head-office consent. • Loan proceeds were remitted to suppliers Yantai Huixing and Yantai Lihe—entities sharing personnel links with the Subject Group Companies—and swiftly routed back through these or other parties. Fund-flow analysis indicates the bulk of the borrowings likely returned to Yantai Lihe. • One facility maturing in July 2027 carries joint-and-several guarantees from Ms. Xu Hui, Yantai Liheng and another individual.
4. Abnormal losses of RMB34.76 million in July-August 2024 Losses stemmed from retrospective booking of sales lacking VAT invoices. The debits involved RMB38.96 million revenue against RMB77.57 million cost, with four customers—two linked to potential related parties—driving almost the entire deficit.
5. Forged corporate resolutions and unauthorised share transfer • Minutes filed for a 24 September 2024 Luxincheng shareholder meeting carried falsified signatures and chops of Group representatives. Subsequent filings replaced two Chiho Env-nominated directors with individuals connected to minority partner Shandong Magnet and amended articles to weaken board oversight. • On 14 July 2026, Yantai Qisheng’s registered owner changed from Yantai Liheng to Yantai Xinnafu without Group approval; Yantai Xinnafu also exhibits personnel overlap with other related entities.
Other observations
• Five counterparties—Yantai Lihe, Yantai Huixing, Qingdao Runhongda, Yantai Xinnafu and Youshengze—share directors, supervisors, addresses or contact numbers with the Subject Group Companies, indicating a network of undisclosed related parties. • Attempts to interview key former executives, retrieve devices, and access post-September 2024 accounting data were unsuccessful, constraining evidence collection.
Next steps
The Special Investigation Committee will issue recommendations upon finalising the forensic report. Separately, Ernst & Young has substantially completed an internal-control review, detailed in a 30 September 2026 announcement.
Trading status
Chiho Env’s shares (HKEX: 00976) have been suspended since 1 April 2025 and will remain halted until the Stock Exchange’s resumption conditions—chiefly disclosure, impact assessment and remedial action—are satisfied.