(Yicai Global) July 14 -- Biovalley Pharmaceutical has become the first company listed on the 10-month-old Beijing Stock Exchange to be fined by the bourse.

The exchange handed the penalty to Biovalley Pharma, a herbal medicine maker, related persons, and the company’s listing sponsors two days ago for illegal appropriation of funds, saying the company has an issue with capital appropriation by major shareholders and information disclosure violations.

Former controlling shareholder GSR Ventures and Lin Yanhe, the Kunming-based firm’s actual controller, chairman, and general manager, received a public reprimand, while the firm and He Yuan, chief financial officer and board secretary, were sent a letter of criticism. Its listing advisor Huarong Securities received a warning letter, and two underwriters were given letters of criticism.

After Biovalley Pharma’s auditor refused to sign off its 2021 annual earnings report, the company admitted at the end of April that its then controlling shareholder had appropriated CNY277 million (USD41.2 million) of the firm’s money for non-operational purposes. The Beijing Stock Exchange then proceeded to open an investigation.

Biovalley Pharma said on July 6 that GSR Ventures and Lin Yanhe had handed back CNY20 million (USD3 million) of the misappropriated funds, with CNY257 million of principal and interest yet to be returned. It also noted that while the two parties were being investigated by the BSE, Sunny Creative Capital Shenzhen had taken a 9.2 percent stake in Biovalley Pharma for CNY110 million at the end of June, gaining actual control of the company and shaking up its management.

The bourse issued an inquiry letter the same day, requesting an explanation for the change of controller and whether this would lead to instability. Biovalley Pharma has yet to respond.

The company had been listed on the National Equities Exchange and Quotations, the predecessor of the BSE, before it became one of the first to move over to the new trading venue in November.

Editors: Tang Shihua, Futura Costaglione