Zhejiang Regulator Forces Shenqqu Stakeholders to Complete Profit Compensation

Shenqqu Tech's 2020 Revenue Fraud Leades to Unmet Compensation Deadlines

The Zhejiang Bureau of the China Securities Regulatory Commission has ordered four entities to immediately honour outstanding profit-guarantee compensation linked to Century Huatong Group's 2019 acquisition of Shenqqu Technology. The move follows the discovery that Shenqqu artificially inflated its 2020 revenue and profit—a violation already penalised by the CSRC in November 2024—which pushed the subsidiary's adjusted net profit below the promised threshold.

When Century Huatong restated Shenqqu's figures in April 2025, the 2020 post-deduction net profit attributable to the parent fell from RMB 2.986 billion to RMB 2.619 billion, meaning the original performance target was missed. Under the 2019 asset-restructuring agreement, three entities—Shanghai Yaoruri Network Technology Partnership, Shanghai Yiyusheng Enterprise Management Consulting Partnership, and Shanghai Jiyufan Enterprise Management Consulting Partnership—were required to compensate Century Huatong with a combined 126.6 million shares. Yaoruri owed 77.68 million shares, and the other two partnerships each owed 24.47 million shares, with all parties jointly and severally liable for each other's obligations.

As of the latest check, Jiyufan has delivered its full share compensation in August 2025, but Yaoruri and Yiyusheng have not made any payment. Moreover, the parties that provided additional guarantees have also fallen short: Century Huatong's former controlling shareholder, Zhejiang Huatong Holdings Group, guaranteed Yaoruri's obligation and has not acted, while then-CEO Wang Ji guaranteed Jiyufan's obligation. Even Jiyufan, despite fulfilling its own direct duty, has not honoured its joint-liability undertakings for the other two partnerships.

The Zhejiang CSRC bureau has now issued a corrective order, recording the breach in the securities and futures market integrity archive and demanding written rectification reports within ten working days. The parties may appeal but the order remains in force during any review or litigation.

Why the Unfulfilled Guarantees Matter for Century Huatong's Governance

The 2020 Shenqqu Accounts: How a Restatement Unravelled the Deal

Shenqqu Technology was the cornerstone of Century Huatong's pivot into gaming, acquired in 2019 through a major asset restructuring. The performance guarantee was meant to underpin the deal's valuation. The CSRC's administrative penalty found that Shenqqu overstated 2020 revenue and profit, which likely masked a genuine shortfall at the time. Once the books were corrected, the gap between the original promise (RMB 2.986 billion) and the restated figure (RMB 2.619 billion) became unbridgeable, instantly triggering compensation clauses that had been dormant for years.

Where the Responsibility Chains Are Breaking

The structure of the guarantees is unusually layered. Yaoruri, Yiyusheng and Jiyufan share joint liability, meaning each is on the hook for the others. On top of that, Zhejiang Huatong Holdings pledged to backstop Yaoruri, and Wang Ji personally guaranteed Jiyufan. So far only the direct share transfer from Jiyufan has materialised. Yaoruri and Yiyusheng, despite holding no obvious public financial profile as partnerships, appear unable—or unwilling—to deliver shares worth hundreds of millions of renminbi. Zhejiang Huatong Holdings, which once controlled the listed company, has not stepped in. The result is a multi-layer failure that tests both the contractual architecture and the enforcers' patience.

What This Signals About Century Huatong's Oversight

For Century Huatong, the saga raises fresh governance questions. The company already absorbed reputational damage from the accounting fraud penalty, and now the failure of its former controllers and deal partners to meet compensation obligations compounds the perception of weak enforcement of critical financial promises. While the listed company itself is the aggrieved party seeking the shares, unresolved compensation clouds the capital structure and keeps a potential equity overhang in play—shares that should have been cancelled remain outside the company's control. The CSRC's decision to place the order in the integrity archive further signals that regulators view this as more than a routine contractual dispute.

What Century Huatong and Its Investors Should Watch Right Now

For Century Huatong's management and board: The company needs to pursue judicial enforcement of the compensation obligations if voluntary compliance remains absent. The joint-liability chain should be tested in court to secure the 77.68 million shares from Yaoruri and the 24.47 million from Yiyusheng, and to claim against the respective guarantors. A swift legal strategy is essential to avoid a prolonged equity overhang that could spook investors ahead of any future capital raising.

For current shareholders: Watch for any announcement of litigation or negotiated settlement. The key number is the total of 126.6 million shares—any failure to recover them could imply a dilutive event if the company issues new stock for a different purpose while compensation shares remain undelivered. Also monitor whether Zhejiang Huatong Holdings or Wang Ji face asset freezes; such moves would indicate regulators are escalating pressure.

For analysts covering the gaming sector: The episode is a reminder to scrutinise performance-guarantee mechanisms in M&A-heavy companies. In the case of Century Huatong, the unrecovered compensation could begin to factor into models if the shortfall persists through the next reporting cycle.