Jiangsu Shentong Valve Co., Ltd. Subsidiary Management System

Jiangsu Shentong Valve Co., Ltd.
subsidiary management system
(Revised at the third meeting of the sixth session of the Board of Directors)

Chapter I General Provisions
Article 1 Jiangsu Shentong Valve Co., Ltd. (hereinafter referred to as "the company" or "parent company") in order to strengthen the management of subsidiaries, maintain the company's image and protect the interests of investors, in accordance with the "Company Law", "Securities Law", "Shenzhen Stock Exchange Stock Listing Rules", "Shenzhen Stock Exchange Listed Companies Self-Regulatory Guidelines No. 1-Main Board Listed Companies Standardized Operation" and other laws, regulations and rules, as well as the "Articles of Association", this system is formulated.
Article 2 The parent company referred to in this system refers to Jiangsu Shentong Valve Co., Ltd. (excluding subsidiaries); the subsidiary refers to the company or other organization with independent subject qualification invested and established by Jiangsu Shentong Valve Co., Ltd. according to the overall industrial structure and business development needs, including:
(I) wholly-owned subsidiary refers to the subsidiary/other organization in which the company directly or indirectly invests and holds 100% of the shares in the subsidiary/other organization;
(II) holding subsidiary: a subsidiary/other organization in which the company holds more than 50 per cent of the shares, or less than 50 per cent, but which is able to determine the composition of more than half of its board of directors, or which can be effectively controlled by agreement or other arrangement. Includes controlling subsidiaries of wholly-owned subsidiaries, wholly-owned subsidiaries of controlling subsidiaries, and controlling subsidiaries.
Article 3 The purpose of strengthening the management of subsidiaries is to establish an effective control mechanism to control the organization, resources, assets, investments, etc. of the parent company and the operation of the parent company, so as to improve the overall operational efficiency and anti-risk ability of the parent company.
Article 4 The parent company shall exercise the management of major matters of the subsidiary in accordance with the requirements for the control of the assets of the subsidiary and the standardized operation of the listed company. At the same time, it has the obligation to guide, supervise and provide related services to its subsidiaries.
Article 5 The subsidiary company shall operate independently and manage independently under the framework of the overall policy and objectives of the parent company, and operate the property of the enterprise legal person legally and effectively. At the same time, the provisions of the parent company's system for subsidiaries should be implemented.
Article 6 A subsidiary company shall establish and improve the corporate governance structure and standardized operation system in accordance with the provisions of the Company Law and relevant laws and regulations.
Article 7 The subsidiary company shall strengthen self-discipline management, and consciously accept the work inspection and supervision of the parent company, and shall truthfully report the situation and explain the reasons for the inquiries raised by the board of directors and the board of supervisors of the parent company.
Article 8 A subsidiary company shall provide the parent company with information on the company's operating performance, financial status and operating results, market prospects and other information in a timely, complete and accurate manner, so that the board of directors of the parent company can make scientific decisions and supervise and coordinate.
Article 9 The company, as an investor, shall, in accordance with the requirements of the China Securities Regulatory Commission and the Shenzhen Stock Exchange for the standardized operation of listed companies and the corporate governance structure, supervise and manage the major matters of the subsidiary in its capacity as a shareholder or controller, and have the investment enterprise in accordance with the law. Enjoy the power of investment income and decision-making on major matters.
Chapter II Personnel Management
Article 10 The company shall conduct unified management of its holding subsidiaries and establish an effective management process system. All functional departments of the company shall, in accordance with this system and relevant internal control systems, manage, guide, and supervise the holding subsidiaries in a timely and effective manner. Implement effective supervision in finance, human resources, and business management.
Article 11 the company shall appoint or recommend directors (or executive directors), supervisors and senior managers to the subsidiary in accordance with the provisions of the articles of association of the subsidiary, and make appropriate adjustments to the candidates of directors (or executive directors), supervisors and senior managers appointed or recommend during the term of office as necessary.
Article 12 The directors (or executive directors), supervisors and senior managers of the subsidiaries appointed or recommend by the company shall exercise the following duties:
(I) exercise relevant rights and assume relevant management responsibilities in accordance with the law;
(II) supervise and urge the subsidiary company to earnestly abide by the relevant laws and regulations of the state, operate in accordance with the law, and standardize its operation;
(III) coordinate the relevant work between the company and its subsidiaries to ensure the implementation of the company's development strategy and the resolutions of the board of directors and the general meeting of shareholders;
(IV) loyalty, diligence, due diligence, and earnestly safeguard the company's interests in the subsidiary is not infringed;
The (V) regularly or at the request of the company to report to the company the production and operation of the subsidiary company, and timely report to the company the major matters stipulated in the information disclosure management system;
Matters (VI) included in the board of directors, the board of supervisors or the general meeting of shareholders of the subsidiary shall be communicated with the company in advance and submitted to the office meeting of the president of the company, the board of directors or the general meeting of shareholders for consideration in accordance with the prescribed procedures;
(VII) undertake other tasks assigned by the company.
Article 13 the directors (or executive directors), supervisors and senior managers of subsidiaries shall master the relevant systems that should be observed as subsidiaries of listed companies to ensure the standardized operation of the company.
Article 14 the directors (or executive directors), supervisors and senior managers of subsidiaries appointed or recommend by the company shall, during their term of office, submit an annual report on their work to the management of the company at the end of each year in accordance with the requirements of the management of the company, and conduct an annual assessment in accordance with the company's assessment system.
Article 15 A subsidiary company shall strengthen self-discipline management, and consciously accept the inspection and supervision of the company's work, and the directors (or executive directors), supervisors and senior managers of the subsidiary shall truthfully reflect the situation and explain the reasons for the inquiries raised by the board of directors, the board of supervisors and the management of the company.
Article 16 The subsidiary company shall refer to the relevant personnel management system of the company and establish a standardized labor and personnel management system in combination with its own actual situation. The post setting of the subsidiary company shall be based on the principle of lean and efficient, and implement the mode of fixed staffing. The personnel changes of the management and core personnel of each subsidiary company shall be reported and filed to the parent company.
Chapter III Financial Management
Article 17 The basic tasks of the financial management of subsidiaries are: to implement the financial and tax policies of the state, to formulate various rules and regulations of accounting and financial management in accordance with the laws, regulations and other relevant provisions of the state and in combination with the specific conditions of the company, to ensure the legality, authenticity and integrity of accounting information; to raise and use funds reasonably, to effectively control business risks, and to improve the efficiency and effectiveness of the use of funds; make effective use of the company's assets, strengthen cost control management, and ensure the preservation and appreciation of the company's assets and sustainable operation.
Article 18 A subsidiary company shall carry out daily accounting work in accordance with the relevant provisions of the Accounting Standards for Business Enterprises in accordance with the company's production and operation characteristics and management requirements.
Article 19 The following transactions of a subsidiary shall be carried out in accordance with the accounting policies of the parent company:
The (I) parent company shall, in accordance with the relevant provisions of the accounting system, follow the principle of prudent and effective prevention and resolution of risks, formulate and implement the internal control system on the provision for impairment of assets and the provision for losses approved by the board of directors, and the subsidiary shall implement it in accordance with the provisions and reflect it truthfully in the accounting statements;
The accounting policies and accounting estimates and changes adopted in the daily accounting and financial management of the (II) subsidiary shall follow the financial accounting system of the parent company and its relevant provisions;
The (III) subsidiary shall, in accordance with the requirements of the parent company for the preparation of consolidated accounting statements and external disclosure of accounting information, submit accounting statements and provide accounting information in a timely manner. Its accounting statements are also audited by an auditor commissioned by the parent company.
Article 20 A subsidiary company shall not lend funds or make any form of guarantee or mortgage without the written approval of the parent company.
Chapter IV Internal Audit Supervision
Article 21 The parent company shall regularly or irregularly exercise audit supervision over its subsidiaries.
Article 22 The contents of internal audit mainly include: economic efficiency audit, project audit, major economic contract audit, system audit and the economic responsibility audit of the head of the unit during the term of office and the outgoing economic audit.
Article 23 The internal audit department of the parent company shall perform the following main duties:
The (I) examines and evaluates the completeness, reasonableness and effectiveness of its subsidiary's internal control system;
(II) audit the accounting information and other relevant economic information of subsidiaries, as well as the legality, compliance, authenticity and completeness of the financial income and expenditure and related economic activities reflected, including but not limited to financial reports, performance reports, voluntary disclosure of predictive financial information, etc.
Article 24 After receiving the audit notice, the subsidiary company shall be prepared to accept the audit and give active cooperation in the audit process. Conduct regular self-inspection as required if necessary.
Article 25 After the audit opinion and audit decision approved by the parent company are served on the subsidiary, the subsidiary must conscientiously implement it.
Article 26 The internal audit system of the parent company shall also apply to the internal audit of the subsidiary.
Chapter V Management of Major Matters
Article 27 The development plan of a subsidiary company must obey and serve the overall plan of the parent company, and refine and improve its own plan under the framework of the parent company's development plan.
Article 28 major transactions, daily transactions, related party transactions, merger/division and spin-off, major litigation and arbitration, bankruptcy matters, changes in accounting policies/accounting estimates and asset impairment and other major matters that should be disclosed in subsidiaries shall be regarded as major matters of the parent company, which shall be implemented in accordance with the relevant provisions of the Listing Rules of Shenzhen Stock Exchange, Report to the parent company to perform relevant decision-making procedures and disclosure obligations.
Article 29 when a subsidiary company implements major matters such as entrusted financial management, stock investment, futures investment, restructuring and reorganization, merger and acquisition, investment and financing, asset disposal, income distribution, etc., it shall follow the provisions of the company law, the articles of association and the relevant rules and regulations of the parent company, and shall be implemented after approval within the relevant authority of the president, chairman of the board of directors and the general meeting of shareholders of the parent company. Financial funds, human resources and other businesses are subject to the business guidance and management of the financial director and human resources director of the parent company. In principle, procurement businesses such as bulk materials, machinery and equipment, and engineering facilities shall be voluntarily reported to the bidding center for bidding and procurement. If the bidding conditions are not available for the time being, price comparison between three or more suppliers shall be implemented and the best procurement shall be carried out.
Article 30 Where a subsidiary company intends to make an initial public offering of shares and go public, the board of directors of the parent company shall make a resolution on the specific plan of the subsidiary company's current stock issuance and submit it to the general meeting of shareholders for deliberation.
If the subsidiary intends to be reorganized and listed, the board of directors of the parent company shall make a resolution on the specific plan for the reorganization and listing and submit it to the general meeting of shareholders for consideration.
Article 31 Before submitting major matters for approval, the subsidiary company shall follow the principles of legality, prudence, safety, and efficiency, conduct preliminary inspections and feasibility demonstrations, and submit relevant demonstration plans to the parent company.
Article 32 When a subsidiary company implements a project investment, it must control the approved investment amount to ensure the quality of the project, the progress of the project and the expected investment effect, and complete the final accounts of the project in a timely manner.
Chapter VI Information Disclosure
Article 33 A subsidiary company shall perform the basic obligation of providing the following information:
(I) timely provision of all information that may have a significant impact on the image of the parent company;
(II) ensure that the information provided is true, accurate and complete;
Executive directors, managers and relevant personnel involved in internal information of (III) subsidiaries shall not disclose important inside information without authorization;
The material information provided by the (IV) subsidiary must be in written form and signed by the leader of the subsidiary;
The executive director/general manager of the (V) subsidiary shall be the first responsible person for fulfilling the obligation of providing information.
Article 34 A subsidiary company shall submit quarterly reports, semi-annual reports, annual financial statements and a summary of its operations to the finance department of the parent company and the board of directors within 10 working days from the end of the quarter, semi-annual report and year.
Article 35 Subsidies' construction in progress and foreign investment projects under implementation shall report the implementation progress to the Finance Department of the parent company and the board of directors on a quarterly, semi-annual and annual basis.
Article 36 The subsidiary shall promptly report the following major matters to the finance department of the parent company and the board of directors:
(I) purchase and sale of assets;
(II) foreign investment behavior;
(III) major litigation and arbitration matters;
The conclusion, modification and termination of (IV) important contracts (lending, entrusted operation, entrusted operation, entrusted financial management, gift, contract, lease, etc.);
(V) large bank refund;
(VI) significant operating or non-operating losses;
(VII) suffer heavy losses;
(VIII) major administrative penalties;
(IX) other major matters that need to be reported in a timely manner in accordance with laws, administrative regulations and regulatory documents.
Article 37 The parent company's "Information Disclosure Management System", "Internal Reporting System on Significant Matters" and "Related Transaction Management System" shall apply to subsidiaries.
Article 38 The subsidiary company shall specify the department and personnel responsible for information provision, and file the name of the department, the personnel in charge and the communication method with the office of the board of directors of the parent company.
Chapter VII. Interrelationships between parent and subsidiary companies
Article 39 The planning, organization and management of daily business activities of subsidiaries and the determination of foreign investment projects shall meet the requirements of the parent company and the overall business objectives, long-term planning and development requirements of the parent company; the business objectives and development plans of each holding subsidiary must be coordinated and balanced with the overall business objectives and long-term development plans of the parent company, to ensure the achievement of the parent company's overall business objectives and stable and efficient development.
Article 40 The business activities, internal management, accounting and financial management of subsidiaries shall be subject to the guidance, inspection and supervision of the relevant departments of the parent company.
Article 41 The Company shall focus on strengthening the management and control of its controlling subsidiaries, including, inter alia:
(I) establish a control system for each holding subsidiary, and clarify the selection and appointment methods, duties and powers of directors, supervisors and important senior management personnel appointed to the holding subsidiary;
(II) according to the strategic planning of the parent company, coordinate the business strategy and risk management strategy of the holding subsidiary, and urge the holding subsidiary to formulate relevant business operation plan, risk management procedures and internal control system;
(III) formulate the performance appraisal and incentive and restraint system of the holding company;
(IV) formulate an internal reporting system for major matters of the holding subsidiary, report to the parent company in a timely manner major business events, major financial events, and other information that may have a greater impact on the trading prices of the parent company's stocks and their derivatives, and strictly follow the authorization regulations. Major events are reported to the company's board of directors or shareholders meeting for review;
The (V) requires the holding subsidiary to submit to the secretary of the board of directors of the parent company in a timely manner the resolutions of its board of directors, the resolutions of the general meeting of shareholders or the shareholders' meeting and other important documents;
The (VI) regularly obtains and analyzes the quarterly or monthly reports of each holding subsidiary, including operating reports, production and sales statements, balance sheets, profit statements, cash flow statements, statements on providing funds to others and external guarantees, etc., and entrusts an accounting firm to audit the financial reports of the holding subsidiaries in accordance with relevant regulations;
The (VII) evaluates the implementation of the internal control system of the holding company and its inspection and supervision work.
Chapter VIII Supplementary Provisions
Article 42 matters not covered in this system shall be implemented in accordance with the relevant laws and regulations of the state and the articles of association; if this system conflicts with the laws and regulations promulgated by the state in the future and the articles of association amended by legal procedures, it shall be revised immediately and submitted to the meeting of the board of directors for deliberation and approval.
Article 43 The Board of Directors of the Company shall be responsible for the interpretation and revision of this system.
Article 44 This system shall be formally implemented from the date of adoption by the general meeting of shareholders of the Company.

Board of Directors of Jiangsu Shentong Valve Co., Ltd.
October 26, 2022