(Yicai Global) Oct. 15 -- A recently launched official investigation into Yin Mingshan, a Chinese businessman and controlling shareholder of Lifan Industry Group, could impact the motorcycle maker’s bankruptcy reorganization and may precipitate its delisting and liquidation.

The China Securities Regulatory Commission started its inquiry into the company’s controlling shareholder Lifan Holdings and actual controllers Yin Mingshan, Yin Xidi, Yin Suowei and Chen Qiaofeng for information disclosure violations, the Chongqing-based firm announced on Oct. 13, according to an International Financial News report yesterday.

Lifan Industry was set up in 1997 and previously scored outstanding achievements, while Yin was Chongqing’s wealthiest person, ranking last on the list of China's 50 Richest Entrepreneurs in 2000. The company forayed into car production in 2005, but began to skid downhill in 2014. The firm applied for court reorganization after it became unable to discharge its debts and its assets were insufficient to pay off all liabilities.

The company received a delisting warning in August, but at the end of last month pointed to the Chongqing Liangjiang New Area Government and Geely Automobile Holdings as prospective white knight investors for its reorganization. The firm found investors so quickly that industry insiders concluded it was likely to survive.

The CSRC’s investigation has cast a pall on the firm’s reorganization. It will face potential bankruptcy and delisting if the re-shuffle fails, International Financial News said.

Shares of Lifan Industry [SHA: 601777] fell 2.1 percent today to end at CNY5.60 (83 US cents) each. The stock has lost 8.8 percent since its close on Oct. 12. Its daily trading limit was halved to 5 percent after it received the delisting warning.

Of the CSRC’s investigation targets, Lifan Holdings is the firm’s controlling shareholder with a 47.08 percent stake, Yin Mingshan is Lifan Holdings’ founder, Chen is Yin’s wife, and Yin Xidi and Yin Suowei are their children. The four, who are also directors of the firm, own 0.49 percent directly and 47.08 percent indirectly through Lifan Holdings.

The investigation has no nexus with the firm’s daily operations, management and business and will not impact its normal activities, Lifan said in its statement, but omitted mention of whether the probe will hamper its ongoing reorganization.

Talk of whether the probe will affect the restructuring is inopportune at this juncture, a company insider said.

Editor: Ben Armour