Midea Real Estate Confesses! 650 Million Yuan in Funds Illegally Transferred to Major Shareholder

Hong Kong-listed company Midea Real Estate (03990.HK) recently issued a self-disclosure of violations, which has attracted widespread attention in the capital market.

Recently, Midea Real Estate announced that internal monitoring and inspections revealed that in 2025, the company used three trust companies to covertly transfer up to 650 million yuan to related enterprises controlled by the major shareholder.

The operation path of this illegal transaction appears covert but is actually clear.

In 2025, Midea Real Estate’s wholly owned subsidiaries, Foshan Midea and Guangdong Midea, signed entrusted investment agreements with Wanxiang Trust, Yuecai Trust, and Zhongyuan Trust. Subsequently, these three trust companies acted as channels to provide multiple rounds of unsecured, repayable loans to Shenyang Zhenghui, Nanhai Meiming, and Shunde Tianmei—funds specifically used to supplement these companies’ daily operating capital.

Midea Real Estate explained that this move was aimed at “improving cash management efficiency,” but this explanation cannot hide the illegal nature of the transactions.

According to the Hong Kong Stock Exchange listing rules, related-party transactions must strictly follow statutory procedures such as reporting, disclosure, and approval by independent shareholders. This is a core requirement to protect minority shareholders’ right to information and maintain fairness in the capital market.

However, Midea Real Estate’s transaction directly crossed this red line—Shenyang Zhenghui, Nanhai Meiming, and Shunde Tianmei, the borrowing companies, are all indirectly held by the major shareholder Lu Deyan, making them clearly related parties. The transactions constitute non-exempt related-party transactions, and after consolidation, the highest applicable percentage exceeds 5% but is less than 25%, requiring full disclosure and compliance procedures. Yet, Midea Real Estate failed to carry out any of these.

In response to questions about the violation, Midea Real Estate attributed it to “communication errors within internal departments,” claiming that the business team, when approving and advancing the transactions, did not notify the compliance team that the arrangements might involve related parties or impact financial support under listing rules.

This explanation appears weak and unconvincing.

In fact, behind this seemingly “accidental” violation lie many intriguing details.

Looking back to 2024, Midea Real Estate completed a major business restructuring, divesting its core real estate development operations into a private company, and transforming into a light-asset model focusing on development agency, property services, and asset management, claiming to focus on “stock operations” for high-quality, steady growth.

However, the flow of funds after the transformation reveals close ties with privatization platforms— the three related companies receiving funds correspond to three real estate projects: Shenyang Midea Junlan Jiangshan, Foshan Midea Binhu Xuefu, and Foshan Midea Xijiangfu. These projects were previously developed by Midea Real Estate but were transferred to the private platform controlled by the major shareholder He Xiangjian after the 2024 divestment.

It is clear that this illegal fund transfer essentially provided “blood transfusions” to the privatization platform controlled by the major shareholder, starkly contrasting with Midea Real Estate’s claims of “light-asset transformation and focusing on core business.”

More concerning is the risk reflected by the proportion of funds involved.

As of the end of 2024, Midea Real Estate held approximately 1.034 billion yuan in cash and cash equivalents. The maximum 650 million yuan of unpaid loans in this violation accounted for about 63% of its cash on hand at that time, a very high proportion.

For a listed company that has divested heavy assets and claims to focus on light-asset operations, using over 60% of its cash for illegal related-party loans not only contradicts the original goal of “improving cash management efficiency” but may also affect its normal operations in light-asset businesses and harm the interests of minority shareholders.

It is worth noting that in 2024, Midea Real Estate’s net profit was -2.35 billion yuan, indicating a loss. Such large-scale illegal fund transfers undoubtedly increase the company’s financial risks and trust crisis.

Currently, Midea Real Estate has urgently terminated the relevant transactions and stated that by the end of 2025, all unpaid principal and accrued interest have been fully settled, and the entrusted investment agreements have been terminated.

However, this violation scandal is unlikely to end with a simple explanation.

As a Hong Kong-listed company, Midea Real Estate’s misconduct may face regulatory inquiries and penalties from the Hong Kong Stock Exchange. Its market reputation and investor confidence have already been impacted. More importantly, the internal control loopholes exposed in this incident, along with governance shortcomings during the company’s transformation, warrant vigilance.