Xilimen and its subsidiaries sue the controlling shareholder, involving nearly 500 million yuan, causing the company's stock price to hit the daily limit down.

Red Star Capital Bureau, April 2: On April 1, Liyinmen Health Sleep Technology Co., Ltd. (hereinafter “Liyinmen,” 603008.SH) issued four major announcements in a row, fully exposing the internal crisis long concealed by this mattress industry leader to the spotlight of the capital markets.

The China Securities Regulatory Commission has filed a case to investigate the company; the actual controller has also been filed for investigation; and the shares of the controlling shareholder and its parties acting in concert have been judicially frozen. As the listed company Liyinmen and its subsidiaries are plaintiffs, they have taken the controlling shareholder and its parties acting in concert to court, seeking compensation of nearly RMB 480 million.

Company and Actual Controller Filed for Case

Liyinmen and Its Subsidiaries Sue the Controlling Shareholder

On April 1, the company disclosed two “Filing Notice Letters.” The China Securities Regulatory Commission decided to file separate investigations into Liyinmen and its actual controller, Chen Ayu, with the reasons being “suspected violations of information disclosure laws and regulations.”

The two notice letters have adjacent filing numbers, showing that the regulator initiated investigation procedures against the company and relevant responsible persons at the same time.

Earlier, before the company disclosed major matters on March 27, its stock price had already experienced consecutive declines and trading volume had expanded. During that period, the scale of net outflows of funds from the main force was relatively large. Around questions such as whether information disclosure was timely and whether any insider information had been leaked in advance, the market had already shown some attention. The specific conclusions of this filing and investigation await subsequent regulatory disclosure.

At the core of this filing and investigation is to verify whether the company has issues such as untimely information disclosure or the premature leakage of sensitive information.

In the same day’s announcement, the company also disclosed a board resolution: Liyinmen filed a lawsuit with a statement of claim, suing the company’s controlling shareholder and its parties acting in concert, with the amount involved reaching RMB 478 million.

On April 1, Liyinmen issued an announcement regarding the filing of a lawsuit against the controlling shareholder and its parties acting in concert. According to the announcement, on March 31, Liyinmen and two of its wholly owned subsidiaries, as plaintiffs, sued the controlling shareholder Hua Yi Intelligent Manufacturing and its parties acting in concert, Hua Han Investment, while Chen Ayu’s case had been accepted by the People’s Court of Yuecheng District, Shaoxing City.

The company disclosed that the relevant funds mainly involve two scenarios: first, loan-to-loan transfers—after the relevant parties obtained loans through the company, they transferred the funds out for use, and about RMB 72 million has not been repaid; second, factoring financing arrangements—between 2025 and 2026, the relevant parties, using the name of suppliers, raised financing from banks, the funds actually flowed into designated accounts, while the corresponding payment obligations were borne by the company, involving an amount of about RMB 406 million.

The cause of action in this lawsuit is a dispute over liability for harming the interests of the company, with the amount involved initially calculated at RMB 478 million. The plaintiffs believe that the defendants, through business models of loan-to-loan transfers and factoring financing, occupied funds and thereby harmed the interests of the company.

As of the date the announcement was disclosed, the balance of non-operating funds occupied by Liyinmen’s controlling shareholder and its related parties totaled RMB 190 million, exceeding 5% of the absolute value of the net assets audited in the most recent period.

Liyinmen warned that, according to relevant regulations, if the related party fails to clear and rectify the issue within one month, the company’s stock may be subject to other risk warnings; if the audit institution issues an opinion that is not a “no reservation” opinion, the stock may also be subject to risk warnings or delisting risk warnings.

At the judicial level, the People’s Court of Changxing County, Zhejiang Province has already implemented freezing measures on the relevant shares on March 30.

Specifically, Hua Yi Intelligent Manufacturing has 3.16 million-plus shares frozen, accounting for 3.73% of its shareholding; Hua Han Investment has 8.40 million shares frozen, accounting for 22.82% of its shareholding; and all 8,107,025 shares held under Chen Ayu’s name have been frozen, accounting for 100% of its shareholding, with the freeze period ending on March 29, 2029.

In total, the shares frozen across the three parties amount to about 19.67 million shares, accounting for 5.34% of the company’s total share capital.

The fact that the actual controller’s shareholding has been frozen in full also means that its ability to control the listed company has been subject to substantive constraints.

The company states that if the related frozen shares cannot be properly disposed of in the future, there is a possibility of forced transfer or judicial disposal, which could in turn affect the stability of the company’s controlling interest.

Subsidiary Funds of RMB 100 Million Misappropriated

Liyinmen Freezes RMB 900 Million in Fund Accounts

All of this started with events traced back to March 27. On that day, Liyinmen disclosed that RMB 100 million of funds from its controlling subsidiary, Xitu Technology Co., Ltd. (hereinafter “Xitu Technology”), had been illegally transferred out by internal personnel.

After the company’s review, it found that the relevant personnel were suspected of taking advantage of their positions to illegally divert company funds. To further prevent fund-related risks and ensure the safety of funds of the listed company, the company, on March 26, applied to public security authorities for case filing and investigation.

To prevent risks from spreading further, Liyinmen adopted extreme risk-control measures and implemented protective self-freezing on three bank accounts of its three subsidiaries. As of the date of the announcement, the total amount of funds in the frozen accounts exceeds RMB 900 million.

The announcement shows that the bank accounts involved in the frozen status for Liyinmen’s controlling subsidiary are—two accounts of Hangzhou Xiyue at China CITIC Bank, Hangzhou Dongxin Sub-branch and China CITIC Bank, Hangzhou West Lake Sub-branch, which froze funds of RMB 375 million and RMB 445 million respectively, totaling RMB 820 million; and the account of Shaoxing Xinxijia Furniture Sales Co., Ltd. (abbreviated as “Shaoxing Xinxijia”) at China CITIC Bank, Hangzhou Qiantang Sub-branch, freezing RMB 80 million.

On the very same day the announcement was issued, the Shanghai Stock Exchange quickly sent a regulatory work letter, requiring the company to conduct a comprehensive self-check.

(Liyinmen factory premises. Company website / image)

The total amount of funds involved in this incident is far from trivial for Liyinmen. The above RMB 100 million illegally diverted, plus the RMB 900 million frozen, totals RMB 1.0 billion, accounting for 26.54% of Liyinmen’s most recently audited net assets, and 42.69% of Liyinmen’s most recently audited monetary funds.

Public information shows that Xitu Technology is a wholly owned subsidiary of Liyinmen established in January 2021, with registered capital of RMB 50 million. In 2024, the corporate information shows that it had only 8 employees, and the registered address is in Xiaoshan District, Hangzhou, Zhejiang Province.

It is precisely this small-scale subsidiary that, on its books, held more than RMB 100 million in monetary funds—200% of its registered capital—accounting for nearly 20% of the total monetary funds of all of Liyinmen’s subsidiaries. According to the company’s 2025 interim report, the listed company’s consolidated monetary funds were RMB 1.97B; the parent company held RMB 1.44B; and all subsidiaries combined had cash of only about RMB 530 million.

At present, it is still unclear when exactly this RMB 1.89M funds occurred—was it transferred out in one lump sum or transferred out in multiple batches? Financial professionals have pointed out that if it was transferred in one lump sum, to what extent was authorization required for such a large transfer? If it was transferred out in multiple batches, why was it not discovered in the early stages of the incident? If regulators and internal monitoring were circumvented by splitting the transfers into smaller parts, it would reflect serious loopholes in the company’s fund monitoring system. If it was a single transfer of head office-level funds, it would typically require approval by the finance director, general manager, and even the board of directors, rather than being independently operable by a single individual.

From the perspective of business positioning, Xitu Technology is not an ordinary subsidiary. It is the core strategic platform for Liyinmen’s hotel engineering channel layout. It is also the only entity responsible for developing and operating that channel, serving as the “front end” of the hotel engineering business. Supporting it is the “back end” entity under Liyinmen responsible for producing hotel furniture—the hotel furniture business entity Liyinmen Hotel Furniture Co., Ltd. Together, the two form the company’s hotel engineering channel structure of “one core platform + one production support entity.”

In this incident, Xitu Technology, which bears the brunt, has personnel overlap with Hangzhou Xiyue, which has the most frozen funds. According to a report by First Finance, the legal representative of Xitu Technology, Zhou Yaying, told the media that she serves only as a nominal legal representative. In addition, according to Tianyancha, both Xitu Technology and Hangzhou Xiyue have only two key personnel, and the supervisors of Xitu Technology and Hangzhou Xiyue are the same person—Luo Zhenhua.

Key personnel at Xitu Technology

Key personnel at Hangzhou Xiyue

Hangzhou Xiyue is an important subsidiary of Liyinmen. Liyinmen’s 2025 semi-annual report shows that Liyinmen has 10 major controlling and invested companies, with 6 in manufacturing and 4 in sales. Hangzhou Xiyue is one of the four major sales subsidiaries.

The 2025 semi-annual report shows that Hangzhou Xiyue has registered capital of RMB 20 million, with Liyinmen holding 100% of it. In the first half of 2025, Hangzhou Xiyue’s total assets were RMB 93.8253 million, net assets were RMB 2.17M, revenue was RMB 250 million, and net profit was RMB 4B.

As an important subsidiary, the main positions at Hangzhou Xiyue are directly held by the listed company’s deputy general manager. According to Tianyancha, the legal representative, director, and general manager of Hangzhou Xiyue—Zhu Xiaohua—also serves as the deputy general manager of the listed company Liyinmen.

Companies where Zhu Xiaohua serves as an executive

Financial statements show that in 2024, Liyinmen’s parent company generated sales revenue of RMB 4.72B, while the subsidiaries combined generated sales revenue of RMB 5.04B; the parent company’s selling expenses were RMB 157 million, while the subsidiaries’ combined selling expenses were RMB 1.87 billion.

According to a report by First Finance Daily, analysts believe that this sales revenue/expense structure indicates that the group’s selling expense budget and management focus have shifted downward to the subsidiary level. The misappropriation of Xitu Technology’s RMB 100 million funds likely relates to the fact that this subsidiary has relatively large autonomy over its expense expenditures and control over fund allocation.

In the capital market, as of the midday close on April 2, Liyinmen hit the daily limit down, with the share price at RMB 13.68 per share and a total market value of RMB 5.038 billion. The company’s 2025 third-quarter report shows that Liyinmen had 15,978 shareholder accounts.

(This article does not constitute any investment advice; operate at your own risk)

Edited by Sun Zhicheng, Xiao Shiqing, based on publicly available information including First Finance

Reviewed by He Xianju