EHang asked to conform to US rules for public companies
Guangzhou, CHINA – It seems like it is squeaky bum time again for Chinese drone maker EHang and its shareholders in the USA.
Less than a week after EHang’s filing of a 20F annual report statement for the 2021 financial year, the U.S. Securities and Exchange Commission (SEC) has notified the eVTOL aircraft manufacturer that it has been flagged for accounting procedures scrutiny under the Holding Foreign Companies Accountable Act (HFCAA).
The Form 20-F is an annual report that non-US and non-Canadian companies with securities trading in the US are required to fill by the SEC within four months of the end of their financial year. The form supposedly helps standardise the reporting requirements of foreign-based companies.
Sadly, it seems the SEC is not happy with EHang’s current accountancy firm, with the federal regulator serving the company with notice on Wednesday May 4, which effectively puts EHang on notice that it needs to use an accounting partner that meets US requirements for transparency.
The HFCAA legislation made it as a law in the statute books in December 2020, a full year after EHang hd completed its initial public offering on Wall Street in December 2019. As an amendment to the Sarbanes-Oxley Act, the HFCAA’s stated purpose is to require public companies in the US to declare and prove that they are not owned or controlled by the Chinese government.
Public companies failing to comply with its requirements for three consecutive years can have their shares suspended from trading on US stock markets.
In response, EHang has issued the below statement, which we publish in full.
“EHang Holdings Limited today provides an update on its status under the Holding Foreign Companies Accountable Act. The Company was provisionally identified by the US Securities and Exchange Commission as a Commission-Identified Issuer under the HFCAA on May 4, 2022, US Eastern Time, following the Company’s filing of the annual report on Form 20-F for the fiscal year ended December 31, 2021 with the SEC on April 28, 2022.
“The Company understands that this identification under the HFCAA and its implementation rules issued thereunder indicates that the SEC determines that the Company engaged an independent registered public accounting firm whose working paper cannot be inspected or investigated completely by the Public Company Accounting Oversight Board of the United States (the “PCAOB”) to issue the audit report for Company’s financial statements for the fiscal year ended December 31, 2021.
“The Company’s identification on the provisional list does not mean it will be delisted soon. Pursuant to the HFCAA, the SEC shall prohibit a company’s shares or American depositary shares (“ADSs”) from being traded on a U.S. stock exchange or in the over-the-counter trading market in the U.S. if the company has been identified by the SEC under the HFCAA for three consecutive years due to the PCAOB’s inability to inspect its auditor’s working paper related to such company because of a position taken by the authority in the foreign jurisdiction where the auditor is located.
“The Company has been actively exploring possible solutions to best protect the interest of its stakeholders. The Company will continue to comply with applicable laws and regulations in both China and the U.S. and strive to maintain its listing status on the Nasdaq Stock Market.”