Huaibei GreenGold Industry Investment Co. (02450) has released additional details on a RMB294.20 million advance paid to Huaibei Construction Investment Group for steel-related products, an amount equal to roughly 13.0% of total assets as at 30 June 2025 and above the 8% disclosure threshold under Hong Kong Listing Rules 13.13 and 13.15.

The framework agreement and purchase order were signed on 25 December 2025 following internal management approval two days earlier. Payment was executed on 26 December 2025, but adverse weather and specialised logistics requirements prevented delivery by the 10 January 2026 deadline. After negotiations, Huaibei Construction Investment Group refunded the full amount on 29 January 2026.

During the annual audit preparation in February 2026, the company identified that the prepayment constituted an “advance to an entity” under Chapter 13 of the Listing Rules, triggering disclosure obligations that had been overlooked. The lapse arose from a misinterpretation that only loans—not trade prepayments—fell within the rule’s scope, and from internal procedures focused mainly on Chapters 14 and 14A.

Management classifies the incident as a one-off error and has announced several remedial actions:

1. Internal control overhaul: An external consultant has completed a review, leading to new “Related Party Transaction Management Measures,” revised “Fund Payment Management System,” and updated compliance review guidelines effective 6 March 2026. Enhancements include advance-payment checkpoints, automated system alerts for amounts exceeding 8% of total assets, and monthly compliance dashboards.

2. Expanded training: Directors, senior management, finance, compliance and securities teams will complete at least four hours of annual mandatory training, with a first reinforced session held in mid-March 2026, focusing on Chapters 13, 14, 14A and the Corporate Governance Code.

3. Strengthened reporting: All staff must perform size tests on prospective advances, with results reviewed by the compliance head and finance department and retained by the Board secretary’s office.

4. Enhanced adviser interaction: The company has embedded a requirement to consult auditors and legal advisers on first-time or uncertain transactions.

Huaibei GreenGold states that these measures aim to ensure strict future compliance with Hong Kong Listing Rules, particularly those governing advances to entities.