Analysis of the Related-Party Salary Payment Issue in Tianhai Electronics' IPO

Based on the collected information, I will systematically analyze the potential impact of internal control issues such as related-party salary payment on Tianhai Electronics’ IPO review from multiple dimensions.

According to public information, Tianhai Automotive Electronics Group Co., Ltd. (referred to as “Tianhai Electronics”) is applying for an IPO on the Shenzhen Stock Exchange, with China Merchants Securities as its sponsor. Haichang Smart (874519.NQ), a related party of the company, was once its holding subsidiary and was divested in May 2020. However, since Yang Yongjun, former Vice Chairman, and Zhang Jingtang, former Director, who served during the reporting period, are among the actual controllers, Haichang Smart is still classified as a related party.

: Haichang Smart disclosed in its 2023 and 2024 financial reports that in addition to conventional procurement such as wires and auxiliary materials, its related-party transactions with Tianhai Electronics [1]. However, Tianhai Electronics in its prospectus, resulting in an obvious information disclosure omission[1].

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The issue of related-party salary payment is a typical

, which is a relatively serious issue in IPO reviews. According to the spirit of the Listing Review Dynamics released by the Shenzhen Stock Exchange, [2].

Specifically, this issue involves the following violation aspects:

Type of Violation	Specific Performance	Regulatory Attention
Incomplete Information Disclosure	Failure to disclose the related-party salary payment matter	High
Insufficient Disclosure of Related-Party Transactions	Incomplete disclosure of related-party transaction items	High
Questionable Internal Control System	Salary payment on behalf indicates internal control deficiencies	Medium-High

“Even blood brothers keep clear accounts; how can two independently operated companies need the other party to ‘pay salaries on its behalf’”[1]. This question points to the core of the issue:

• Questionable Independence
  : The existence of a salary payment relationship between the two divested related-party companies may indicate that there are still unclear connections in personnel management, financial accounting, and other aspects
• Insufficient Business Rationality
  : A normal independent enterprise has no reasonable commercial logic to require a related party to pay salaries on its behalf
• Potential Risk of Interest Transfer
  : Salary payment on behalf may involve interest arrangements such as occupation of funds and transfer of costs and expenses

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Based on regulatory practice, whether internal control issues such as related-party salary payment will constitute a substantial obstacle to IPO needs to be judged by comprehensively considering the following factors:

Consideration Factor	Analysis
Amount of the Issue	If the amount is material, the impact is more direct
Involvement in Financial Fraud	If involved, it constitutes a red line
Impact on the Authenticity of Financial Statements	If it has an impact, the nature is serious
Recurrence	Recurrence indicates systemic internal control deficiencies

From existing cases,

is a key consideration for regulators. For example, in the case of Junwei Electronics, related-party salary payment existed before 2022, but the company rectified the issue by improving the salary and welfare system, fund management system, and other measures. “From the completion of rectification in 2022 to the date of this inquiry letter response, the issuer has operated in a standardized manner for more than one year, and the implementation effect of the rectification is good”[3].

The Shenzhen Stock Exchange emphasizes that intermediary institutions should “earnestly shoulder the responsibility of preventing financial fraud, make full use of methods such as capital flow verification, penetration verification of customers and suppliers, and on-site verification to ensure that financial data are consistent with actual operating conditions”[2].

Based on current information, the related-party salary payment issue of Tianhai Electronics

:

The Shenzhen Stock Exchange is highly likely to focus on the following in the review inquiry:

• Specific amount, occurrence time, and involved personnel of the salary payment on behalf
• Reasons and commercial rationality of the salary payment on behalf
• Whether there are other undisclosed related-party transactions
• Effectiveness of the internal control system and rectification measures

Referring to cases such as Guoyao Co., Ltd. and Bette Electronics announced by the Shenzhen Stock Exchange, if there is a major information disclosure omission or questionable internal control during the review, the Shenzhen Stock Exchange may

[2]. More extensive violations may be discovered during the supervision process.

Depending on the nature of the issue, the possible regulatory measures include:

• Issuance of a warning letter
• Suspension of the review process
• In severe cases, termination of the review

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Against the background of the full implementation of the registration system,

. The On-Site Inspection Regulations for IPO Enterprises issued by the China Securities Regulatory Commission (CSRC) in 2024 clearly stipulates that regulatory measures such as suspension of review and rejection of applications can be taken against enterprises with financial internal control issues[4].

The Shenzhen Stock Exchange clearly stated in its latest Listing Review Dynamics: “Distinguish between red line/bottom-line issues and rectifiable matters; focus on urging rectification for minor violations, and take severe punishment measures in accordance with regulations for red line/bottom-line issues such as the authenticity of financial data”[2].

Judging from recent regulatory cases:

Case	Issue	Handling Result
Guoyao Co., Ltd.	Concealed off-balance-sheet capital pool and major internal control deficiencies	Review terminated and public condemnation
Bette Electronics	Concealed off-balance-sheet capital pool	Public condemnation
Tianhai Fluid	“Big bath” of five-year financial data and internal control deficiencies	Warning letter and IPO process hindered

These cases indicate that

, and the consequences of concealing internal control issues are severe.

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:

Dimension	Assessment	Explanation
Nature of the Issue	Medium-High Risk	Information disclosure omission, relatively serious in nature
Impact of Amount	To be verified	Need to pay attention to whether the specific amount is material
Internal Control Deficiencies	Exist	Indicates that financial internal control is not sound
Rectification Status	Unknown	No clear disclosure of rectification measures has been seen so far
Whether It Is a Red Line	Not a red line but close	Has not constituted financial fraud yet, but is sensitive in nature

: The related-party salary payment issue of Tianhai Electronics , but it is not inevitable.

:

1. Information Disclosure Defect
   : Failure to disclose the related-party salary payment is a major information disclosure omission, which is highly sensitive to regulators[1]

2. Questionable Internal Control
   : The act of salary payment on behalf reflects that the company’s internal control system may be unsound, requiring in-depth verification

3. Warning from Comparative Cases
   : There have been multiple cases where IPOs were hindered due to internal control deficiencies and information disclosure issues recently[2][4]

4. Still Room for Remediation
   : If the company can:
   • Fully disclose the details of the salary payment on behalf matter
   • Explain its commercial rationality
   • Prove that effective rectification has been completed
   • Obtain sufficient verification opinions from intermediary institutions

   It may gain understanding from regulators

It is recommended to pay attention to the development of the following matters:

Time Node	Focus Matter
Review Inquiry	Whether the Shenzhen Stock Exchange will inquire about the salary payment on behalf issue
Company’s Response	Whether the explanations of Tianhai Electronics and its sponsor are sufficient
Intermediary Verification	Whether the verification scope covers the completeness of related-party transactions
Regulatory Measures	Whether on-site supervision or other regulatory measures are triggered

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1. Proactive Disclosure
   : Fully disclose the detailed information of the related-party salary payment matter in the prospectus
2. Sufficient Explanation
   : Explain the reasons, commercial rationality and background of the salary payment on behalf
3. Thorough Rectification
   : Demonstrate the completed internal control rectification measures and their operation effects
4. Intermediary Verification
   : Cooperate with the sponsor to conduct a comprehensive penetration verification of related-party transactions

1. Focus on Review Progress
   : Closely track the review dynamics of the Shenzhen Stock Exchange and the inquiry responses
2. Assess Internal Control Risks
   : Pay attention to the soundness and implementation effectiveness of the company’s internal control system
3. Comprehensively Judge Value
   : Make rational investment decisions based on fundamental analysis

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[1] Sina Finance - “Tianhai Electronics’ IPO: Should the Concealment of Related-Party ‘Salary Payment on Behalf’ Be Clarified?” (https://finance.sina.cn/stock/ggyj/2026-01-13/detail-inhhchmx6164204.d.html)
[2] Shenzhen Stock Exchange - “Guideline No. 3 for Listing Review Business” (https://docs.static.szse.cn/www/lawrules/service/share/W020250103512101008143.pdf)
[3] Junwei Electronics - Response Report to the Inquiry Letter for IPO on the Growth Enterprise Market (https://reportdocs.static.szse.cn/UpFiles/rasinfodisc1/202306/RAS_202306_38ECCB8DA35A4EDA88D92A8880AA5F25.pdf)
[4] CNfol.com - “Tianhai Fluid Receives Warning Letter as Five-Year Financial Data ‘Big Bath’ Triggers Regulatory Attention” (http://mp.cnfol.com/26196/article/1768302047-142212056.html)