SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
|☐||Preliminary Proxy Statement.|
|☐||Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)).|
|☒||Definitive Proxy Statement.|
|☐||Definitive additional materials.|
|☐||Soliciting material pursuant to §240.14a-12|
CHINA RECYCLING ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
|☒||No fee required.|
|☐||Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.|
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|☐||Fee paid previously with preliminary materials.|
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CHINA RECYCLING ENERGY CORPORATION
4/F, Tower C
Rong Cheng Yun Gu Building
Keji 3rd Road, Yanta District
Xi’an City, Shaanxi Province
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 28, 2020
You are cordially invited to attend the 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”) of China Recycling Energy Corporation, a Nevada corporation (the “Company”) to be held at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China on December 28, 2020, at 10:00 a.m. local time.
Important Notice Regarding the Availability of Proxy Materials
For the Annual Meeting of Stockholders to be held on December 28, 2020
In accordance with rules issued by the Securities and Exchange Commission, you may access the Notice of the 2020 Annual Meeting, our 2020 Proxy Statement and our annual report for the fiscal year 2019 on Form 10-K (the “Annual Report”) at www.proxyvote.com.
At the 2020 Annual Meeting you will be asked to vote on the following matters:
|1.||To elect five members of our Board of Directors, each director to serve until our 2021 annual meeting of stockholders and|
|2.||To ratify the appointment of Prager Metis, CPAs LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2020.|
The Board of Directors is not aware of any other business to be presented to a vote of the stockholders at the annual meeting.
Stockholders who owned shares of China Recycling Energy Corporation’s common stock, par value $0.001 per share (the “Common Stock”), at the close of business on November 10, 2020, are entitled to receive notice of and to vote in person at the 2020 Annual Meeting. As a stockholder of the Company, you have the right to vote on the proposals listed above. Please read the Proxy Statement carefully because it contains important information for you to consider when deciding how to vote.
You have three options in submitting your vote prior to the 2020 Annual Meeting date:
|(1)||You may sign and return the enclosed proxy card in the accompanying envelope;|
|(2)||You may vote over the Internet at the address shown on your proxy card; or|
|(3)||You may vote by telephone using the phone number shown on your proxy card.|
WHETHER OR NOT YOU PLAN TO ATTEND OUR 2020 ANNUAL MEETING OF STOCKHOLDERS, YOUR VOTE IS IMPORTANT. PLEASE READ THE ATTACHED PROXY STATEMENT AND PROMPTLY COMPLETE, EXECUTE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE–PAID ENVELOPE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. IF YOU ATTEND OUR 2020 ANNUAL MEETING OF STOCKHOLDERS, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE. Attendance at the meeting does not of itself revoke your proxy.
On behalf of the Board of Directors and the employees of China Recycling Energy Corporation, we thank you for your continued support and look forward to you attending the 2020 Annual Meeting.
|/s/ Guohua Ku|
|Chief Executive Officer and|
|Chairman of the Board of Directors|
Xi’an City, Shaanxi Province, China
November 10, 2020
CHINA RECYCLING ENERGY CORPORATION
4/F, Tower C
Rong Cheng Yun Gu Building
Keji 3rd Road, Yanta District
Xi’an City, Shaanxi Province
For the 2020 Annual Meeting of Stockholders to be held on December 28, 2020
To our Stockholders:
We are furnishing this Proxy Statement and the proxy materials to the holders of shares of common stock, par value $0.001 per share (the “Common Stock”) of China Recycling Energy Corporation in connection with the solicitation, by the Company’s Board of Directors (the “Board”), of proxies to be voted at our 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”) to be held at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, China, 710075 on December 28, 2020, at 10:00 a.m. local time, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. Our directors and officers will be present to respond to appropriate questions from stockholders.
When used in this Proxy Statement, the terms “we,” “us,” “our,” the “Company” and “CREG” refer to China Recycling Energy Corporation, a Nevada corporation, and its wholly-owned subsidiaries, Shanghai Yinghua Financial Leasing Co., Ltd. (“Yinghua”) and Sifang Holdings Co., Ltd. (“Sifang”), and Sifang’s wholly-owned subsidiaries, Huahong New Energy Technology Co., Ltd. (“Huahong”) and Shanghai TCH, Shanghai TCH’s wholly-owned subsidiaries, Xi’an TCH Energy Technology Company, Ltd. (“Xi’an TCH”), Xi’an TCH’s wholly-owned subsidiary Erdos TCH Energy Saving Development Co., Ltd. (“Erdos TCH”) and Zhongxun Energy Investment (Beijing) Co., Ltd (“Zhongxun”) and Xi’an TCH’s 90% and Shanghai TCH’s 10% owned subsidiary Xi’an Zhonghong New Energy Technology Co., Ltd. “China” and the “PRC” refer to the People’s Republic of China, excluding, for the purposes of this Proxy Statement, Hong Kong, Macau and Taiwan.
The Proxy materials, including this Proxy Statement on Schedule 14A, our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and the proxy card, and the Notice of Annual Meeting, are being delivered to the stockholders of record on or about November 10, 2020. The purpose of the 2020 Annual Meeting and the matters to be acted on are stated in the accompanying Notice of Annual Meeting of Stockholders. The Board knows of no other business that will come before the 2020 Annual Meeting.
The Board is soliciting votes (1) FOR the election of five director nominees named herein and (2) FOR the ratification of the appointment of Prager Metis CPAs LLP as the independent auditors of the Company for the fiscal year ending December 31, 2020.
We cordially invite you to attend the Annual Meeting. Whether or not you plan to attend, please complete, date and sign the proxy card and return it promptly in the return envelope provided, or you may vote over the telephone or Internet by following the instructions on the proxy card or other enclosed proxy material.
ADDITIONAL INFORMATION ABOUT THESE PROXY MATERIALS AND VOTING
We are providing you with these proxy materials because the Board is soliciting your proxy to vote at the 2020 Annual Meeting, to be held at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China, on December 28, 2020, at 10:00 a.m. local time. on December 28, 2020, at 10:00 a.m., local time.
Even if you plan to attend the 2020 Annual Meeting, we encourage you to submit a proxy in advance by using the internet, the designated toll-free number or by mailing your proxy card so that your vote will be counted even if you later decide not to attend the 2020 Annual Meeting.
The purpose of the 2020 Annual Meeting and the matters to be acted on are stated in the accompanying Notice of Annual Meeting of Stockholders. The Board knows of no other business that will come before the 2020 Annual Meeting. The proxy materials, including this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”), are being distributed and made available on or about November 14, 2020.
Q: Why am I receiving these materials?
A: We are sending you these proxy materials because the Board is soliciting your proxy to vote at the 2020 Annual Meeting. Our directors, officers or executives may also solicit proxies on behalf of our Board by telephone. The Company will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners. one, facsimile, mail or e-mail. If our directors, officers or executives solicit proxies, they will not be specially compensated.
Q: What are stockholders being asked to vote on?
A: At our 2020 Annual Meeting, stockholders will be asked to vote:
|●||to elect five directors to serve until the annual meeting of stockholders in 2021 and|
|●||to ratify the appointment of Prager Metis, CPAs LLC as the independent auditors of the Company for the fiscal year ending December 31, 2020.|
The Board does not know of any matters to be brought before the meeting other than as set forth in the notice of meeting.
Q: Who is entitled to vote at the 2020 Annual Meeting?
A: Our Board has established November 10, 2020, as the record date (the “Record Date”). Only holders of shares of the Company’s Common Stock as of the Record Date are entitled to notice of, and to vote at, the 2020 Annual Meeting. As of the Record Date, the Company had outstanding 3,125,466 shares of Common Stock.
Q: What is the Voting Procedure?
A: Stockholder of Record: Shares Registered in Your Name. If on November 10, 2020 your shares were registered directly in your name with the Company’s transfer agent, Securities Transfer Corporation, then you are a stockholder of record with respect to those shares. As a stockholder of record, you may directly vote your shares or submit a proxy to have your shares voted. We urge you to fill out and return the enclosed proxy card or submit a proxy on the internet as instructed herein to ensure your vote is counted. You may still attend the 2020 Annual Meeting and vote even if you have already voted by proxy.
By Internet — stockholders may vote on the internet by logging on to www.proxyvote.com and following the instructions given.
By Telephone — stockholders may vote by calling 1-800-690-6903 (toll-free) with a touch tone telephone and following the recorded instructions.
By Mail — stockholders must request a paper copy of the proxy materials to receive a proxy card and follow the instructions given for mailing. A paper copy of the proxy materials may be obtained by logging onto www.proxyvote.com and following the instructions given. To vote using the proxy card, simply print the proxy card, complete, sign and date it and return it promptly to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717. In the alternative, the proxy card can be mailed directly to the Company at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China; Attention: Mr. Jackie Shi, Chief Financial Officer.
If you vote by telephone or via the Internet, you do not need to return your proxy card. Telephone and Internet voting are available 24 hours a day and will close at 11:59 P.M. China Time on December 27, 2020.
In Person — stockholders may vote in person at the 2020 Annual Meeting. To vote in person, come to the 2020 Annual Meeting and we will give you a ballot when you arrive. The Board recommends that you vote using one of the other voting methods, since it is not practical for most stockholders to attend the 2020 Annual Meeting.
Please note that the notice letter you received directing you to the website at which the proxy materials are available is not the proxy card and should not be used to submit your vote.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank. If on November 10, 2020 your shares were held not in your name but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the 2020 Annual Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account. You will receive voting instructions from your broker, bank or nominee describing the available processes for voting your stock.
Q: How many shares each holder is entitled to vote at the 2020 Annual Meeting?
A: Each record holder of Common Stock as of the Record Date is entitled to one vote per share of Common Stock.
Q. How do I vote my shares?
A: A proxy card is included with the proxy materials being sent to you. The proxy card allows you to specify how you want your shares voted as to each proposal listed. The proxy card provides space for you to:
|●||Vote for, or withhold authority to vote for, each nominee for director|
|●||Vote for or against, or abstain from voting on, the ratification of the appointment of Prager Metis, CPAs LLC as independent public accountants for the fiscal year ending December 31, 2020.|
If the proxy card is properly signed and returned to us, shares covered by the proxy card will be voted in accordance with the directions you specify on the card. The person named as proxy on the proxy card is Jackie Shi, the Company’s Chief Financial Officer. Any stockholder who wishes to name a different person as his or her proxy may do so by crossing out Mr. Shi’s name and inserting the name of another person to act as his or her proxy. In such a case, the stockholder would be required to sign the proxy card and deliver it to the person named as his or her proxy, and that person would be required to be present and vote at the Annual Meeting. Any proxy card so marked should not be mailed to the Company. If you return a signed proxy card without having specified any choices, Mr. Shi, named as proxy, will vote the shares represented at the 2020 Annual Meeting and any adjournment thereof as follows:
|●||FOR the election of each nominee for director and|
|●||FOR the ratification of the appointment of Prager Metis, CPAs LLC as independent public accountants for the fiscal year ending December 31, 2020.|
Q: How does the Board recommend I vote?
A: The Board unanimously recommends that you vote:
FOR the election of each nominee for director and
FOR the ratification of the appointment of Prager Metis, CPAs LLC as independent public accountants for the fiscal year ending December 31, 2020.
Our executive officers and directors who own shares of Common Stock have advised us that they intend to vote their shares in favor of the proposals presented in this Proxy Statement. As of the close of business on the Record Date, 3,125,466 shares shares of Common Stock were issued and outstanding, approximately 8.48% of which were owned and entitled to be voted by the Company’s executive officers and directors.
Q: What is the voting requirement to approve each of the proposals?
A: Election of Directors. Under Nevada law and the Fourth Amended and Restated Bylaws of the Company (“Bylaws”), the affirmative vote of a plurality of the votes cast by the holders of shares of the Company’s Common Stock is required to elect each director. Consequently, only shares that are voted in favor of a particular nominee will be counted toward such nominee’s achievement of a plurality. Stockholders do not have any rights to cumulate their votes in the election of directors. Abstentions and broker non-votes will not be counted toward a nominee’s total.
Ratification of the selection of Prager Metis, CPAs LLC as our independent registered public accounting firm. The affirmative vote of the holders of a majority of the shares actually voted on the proposal at the 2020 Annual Meeting, provided a quorum is present, is required to ratify the selection of Prager Metis, CPAs LLC as our independent registered public accounting firm. Abstentions will have the effect of a vote “against” the ratification of the appointment of Prager Metis, CPAs LLC as our independent registered public accounting firm. Broker non-votes may be voted for or against this proposal by a broker.
Q: What is a “quorum”?
A: A quorum of stockholders is required for the transaction of business at the 2020 Annual Meeting. The presence of at least one-third of all of our shares of Common Stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, will constitute a quorum at the meeting. Votes cast by proxy or in person at the 2020 Annual Meeting will be tabulated by an election inspector appointed for the meeting and will be taken into account in determining whether or not a quorum is present. Abstentions and broker non-votes, which occur when a broker has not received customer instructions and indicates that it does not have the discretionary authority to vote on a particular matter on the proxy card, will be included in determining the presence of a quorum at the 2020 Annual Meeting. If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is obtained Assuming that a quorum is present, our stockholders may take action at the annual meeting with the votes described below.
Q: What s the effect of an abstention or a broker non-vote?
A: Abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Under applicable regulations, if a broker holds shares on your behalf, and you do not instruct your broker how to vote those shares on a matter considered “routine,” the broker may generally vote your shares for you. A broker non-vote occurs when a nominee holding shares of Common Stock for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Abstentions and broker non-votes will not be considered as votes cast “for” or “against” any proposal or director candidate and will not affect the outcome of the election of directors. Abstentions are counted in tabulations of the votes cast on proposals presented to stockholders as a vote against any matter other than the election of directors and advisory vote on the frequency of the advisory vote on the compensation of our named executive officers, whereas broker non-votes are not counted for purposes of determining whether a proposal has been approved. Unless you provide voting instructions to a broker holding shares on your behalf, your broker may not use discretionary authority to vote your shares on any of the matters to be considered at the 2020 Annual Meeting other than the ratification of our independent registered public accounting firm. Please vote your proxy so your vote can be counted.
Q: What does it mean if I receive more than one proxy card?
A: If your shares are registered differently or in more than one account, you will receive more than one proxy card. Sign and return all proxy cards to ensure that all your shares are voted.
Q: Can I revoke my proxy?
A: You may revoke your proxy at any time before it is exercised at the 2020 Annual Meeting by filing with or transmitting to our corporate secretary either a notice of revocation or a properly created proxy bearing a later date. You also may attend the 2020 Annual Meeting and revoke your proxy by voting your shares at the 2020 Annual Meeting.
Q: How will the Company solicit proxies?
A: Proxies may be solicited in person, by telephone, mail or e-mail by directors, officers and executives of the Company without additional compensation. The Company will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy materials to stockholders.
Q: How do I get electronic access to the proxy materials?
A: This Proxy Statement and the Annual Report on Form 10-K for the year ended December 31, 2019.are available at www.creg-cn.com.
Q: How can a stockholder communicate with the Company’s directors?
A: The Board has established a process to receive communications from interested parties, including stockholders. Interested parties may contact any member (or all members) of the Board or the independent directors as a group, any committee of our Board or any chair of any such committee by mail to c/o Mr. Yongjiang (Jackie) Shi, our Chief Financial Officer, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, China. Correspondence may be addressed to any individual director by name, to the independent directors as a group or to any chair of any committee either by name or title. Mail will not be opened but will be forwarded to the Chairman of the Audit Committee or the named independent director.
Q: How stockholders will know the voting results of the 2020 Annual Meeting:
A: Voting results will be published in a Current Report on Form 8-K issued by us within four (4) business days following the 2020 Annual Meeting.
ELECTION OF DIRECTORS
Our Bylaws provide that the Board shall consist of not less than three (3) nor more than eleven (11) directors. Our Board has fixed the number of directors to be elected at the 2020 Annual Meeting at five (5). Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the Board of Directors) will serve for the remainder of the one year term in which the vacancy occurred and until the director’s successor is elected and qualified.
At the Annual Meeting, we will present the nominees named below and recommend that they be elected to serve as directors until the next annual meeting of stockholders or until their successors are duly elected and qualified.
Presented below is a description of certain biographical information, occupations and business experience for the past five years of each person nominated to become a director. Our Board currently consists of five (5) members. Our current directors are standing for reelection at the 2020 Annual Meeting. Four of the five nominees were previously elected by our stockholders at the 2019 Annual Meeting. Mr. Zhongli Liu was appointed by the Board on March 6, 2020 to fill the vacancy resulted from the resignation of Xiaogang Zhu. The Board is unaware of any circumstances likely to render any nominee unavailable. Directors of the Company hold office until the next annual stockholders meeting, until successors are elected and qualified or until their earlier resignation or removal.
If elected as a director at the 2020 Annual Meeting, each of the nominees would serve a one-year term expiring at the 2021 Annual Meeting and until his or her successor has been duly elected and qualified. Each nominee has consented to being named in this Proxy Statement and to serve if elected. Your proxy will be voted for the election of the five nominees named below unless you give instructions to the contrary. Your proxy cannot be voted for a greater number of persons than the number of nominees named.
The Company’s Board established a Nominating Committee in 2012 to recommend nominees for director to the Board and to ensure that such nominees possess the director qualifications set forth in the Company’s Corporate Governance Guidelines. Additionally, the Nominating Committee reviews the qualifications of existing Board members before they are nominated for re-election to the Board. Once nominees are selected, the Board determines which nominees are presented to the Company’s stockholders for final approval. Each nominee below has been recommended by the Nominating Committee.
Director and Chairman of the Board and Chief Executive Officer
|Xiaoping Guo||67||Director (Independent)||June 2017|
|Geyun Wang||52||Director, Vice President||April 2014|
|Zhongli Liu||61||Director (Independent)||March 2020|
|LuLu Sun||42||Director (Independent)||August 2015|
Mr. Guohua Ku has been a director since his appointment on December 10, 2018, and served as the Chairman of the Board since April 1, 2009. He also was appointed as our Chief Executive Officer as of December 10, 2008. Prior to joining the Company, Mr. Ku served as a Senior Engineer for Yingfeng Technology from 2003 to 2007. From 1979 to 2003, Mr. Ku served in multiple capacities for Shaanxi Blast Air Blower (Group) Co., Ltd., with his last position serving as a Senior Engineer. Mr. Ku’s experience as our Chief Executive Officer, as well as Chairman of the Board, and extensive scientific and operational knowledge and expertise qualifies him to serve as Chairman of the Board and led the Board to conclude that he should be nominated to serve another term as a director.
Mr. Xiaoping Guo was first appointed as a director on June 1, 2017 by the Board to fill a pending vacancy. Mr. Guo has served as the assistant to the president of Datang New Energy Co., Ltd., since 2010. Mr. Guo received his bachelor degree from the Xi’an Jiaotong University in 1977, and his master’s degree in systems engineering from the same school in 2000. Mr. Guo’s extensive project engineering and development experience, as well as his management experience, qualifies him to serve on our Board and led the Board to conclude that he should be nominated to serve another term as a director.
Mr. Geyun Wang was initially elected as a director at the 2014 Annual Meeting, and he also serves as a Vice President of the Company. Mr. Wang is responsible for the procurement of engineering equipment and tendering for project construction, as well as supervision of installation and commissioning for EPC projects. In 2015, Mr. Wang was appointed as a Vice President of the Company. From 2007 to 2015, Mr. Wang was the Deputy General Manager of our subsidiary Xi’an TCH Energy Technology Co., Ltd. Prior to this position, from 2001 to 2007, Mr. Wang served as the Vice President of Sales of Shaanxi Baoji Hongguang Iron & Steel Co., Ltd., where he was responsible for sales of steel products. Mr. Wang received his bachelor degree from Northwestern Polytechnical University in 1988. Mr. Wang’s extensive project construction and management experience, as well as his extensive industry and market expertise, qualifies him to serve on our Board and led the Board to conclude that he should be nominated to serve another term as a director.
Mr. Zhongli Liu was appointed as a director on March 6, 2020 to fill the vacancy resulted from the resignation of Xiaogang Zhu. Mr. Liu was also appointed as the Chairman of the Audit Committee and a member of the Compensation, Nominating and Corporate Governance Committees. Mr. Liu served as the inspector to be in charge of securities inspection at Shaanxi Supervision Bureau of China Securities Regulatory Commission from 1999 to September 2019. He worked as the head of department of economics and management, professor, chief of scientific research at Xi’an Finance And Economics University from 1984 to 1998. Since July 2017, he served as the independent director of the Board at China Haiseng Fresh Fruit Juice Co., Ltd. (00359.HK). Mr. Liu studied industrial economy management at Xi’an Jiaotong University from September 1978 to July 1982 and was awarded his bachelor’s degree of finance in 1982. He studied planning economics at Renmin University of China from 1982 to 1984 and was awarded his master’s degree of finance in 1984. Mr. Liu’s significant financial expertise qualifies him to serve on our Board and led the Board to conclude that he should be nominated as a director.
Ms. LuLu Sun was first appointed as a director on August 5, 2015 by the Board to fill a pending vacancy. Ms. Sun serves as Marketing Director for Net Engine Power Tech. Ltd. Co. in China from June 2013 to present and she was the New Media Business Development Director for Rayli Magazine in China from June 2009 to May 2013. From July 2002 to May 2009, Ms. Sun was the Business Development Project Manager for Sina Mobile in China. Ms. Sun’s extensive experience in marketing and business development in China qualifies her to serve on our Board and led the Board to conclude that she should be nominated as a director.
No family relationships exist among any of our director nominees or executive officers. There are no arrangements or understandings pursuant to which our directors are selected or nominated.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Leadership Structure and Role in Risk Oversight
The Company’s current Board leadership structure separates the board chair and principal executive officer roles into two positions. Mr. Ku has served as both Chairman of the Board and CEO of the Company since April 1, 2009. Our Board continues to believe there are important advantages to Mr. Ku serving in both roles at this time. Mr. Ku is the director most familiar with our business and industry and is best situated to propose Board agendas and lead Board discussions on important matters. Mr. Ku provides a strong link between management and the Board, which promotes clear communication and enhances strategic planning and implementation of corporate strategies. Another advantage is the clarity of leadership provided by one person representing us to employees, stockholders and other stakeholders. The Board has not named a lead independent director.
Our Board is responsible for oversight of the Company’s risk management practices while management is responsible for the day-to-day risk management processes. In the Board’s opinion, this division of responsibilities is the most effective approach for addressing the risks facing the Company. The Board receives periodic reports from management regarding the most significant risks facing the Company. In addition, the Audit Committee assists the Board in its oversight of our risk assessment and risk management policies. Our Audit Committee is empowered to appoint and oversee our independent registered public accounting firm, monitor the integrity of our financial reporting processes and systems of internal controls and provide an avenue of communication among our independent auditors, management, our internal auditing department and our Board.
The Board does not have a formal policy with respect to Board nominee diversity. In recommending proposed nominees to the full Board, the Corporate Governance and Nominating Committee is charged with building and maintaining a Board that has an ideal mix of talent and experience to achieve our business objectives in the current environment. In particular, the Corporate Governance and Nominating Committee is focused on relevant subject matter expertise, depth of knowledge in key areas that are important to us, and diversity of thought, background, perspective and experience so as to facilitate robust debate and broad thinking on strategies and tactics pursued by us.
Independence of the Board of Directors
Our Common Stock is listed on the NASDAQ Capital Market. A majority of our directors, Xiaoping Guo, LuLu Sun and Zhongli Liu are non-employee directors, and our Board has determined that each of them is independent under the independence requirements of Rule 10A-3 promulgated under the Securities Exchange Act and as defined by NASDAQ Rule 5605(a)(2). In addition, all of the members of each of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are independent as defined in NASDAQ Rule 5605(a)(2). As required under applicable NASDAQ listing standards, during the 2019 fiscal year, our independent directors met twice in regularly scheduled executive sessions at which only our independent directors were present.
Board Meetings and Committee Meeting; Annual Meeting Attendance
During the year ended December 31, 2019, the Board held two (2) meetings and acted through unanimous consent on 21 different occasions. In addition, the Audit Committee held four (4) meetings; the Corporate Governance and Nominating Committee held one (1) meeting; and the Compensation Committee held one (1) meeting. During the year ended December 31, 2019, each of the directors attended, in person or by telephone, more than 75% of the meetings of the Board and the committees on which he or she served. We encourage our Board members to attend our Annual Meetings, but we do not have a formal policy requiring attendance. Some of our then-sitting Board members attended the 2019 Annual Meeting.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee currently consists of Xiaoping Guo, Zhongli Liu and LuLu Sun. Ms. LuLu Sun is the chairman of our Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee oversees all aspects of the Company’s corporate governance functions on behalf of the Board, including identifying individuals qualified to become directors, recommending to the Board the selection of director nominees for each meeting of the stockholders at which directors are elected and overseeing the monitoring and evaluation of the Company’s corporate governance practices. The Corporate Governance and Nominating Committee reviewed the performance of all of the current members of the Board and determined and recommended to the Board that all of the current directors should be nominated for re-election. No other candidates were recommended or evaluated. The Corporate Governance and Nominating Committee operates under a written charter, which is available on our website at www.creg-cn.com under the links “Investor Relations – Corporate Governance.”
Selection of Board Nominees
Our Corporate Governance and Nominating Committee is responsible for identifying, selecting and evaluating Board candidates. From a general perspective, candidates are reviewed in the context of the existing Board members, our operating requirements and the long-term interests of our stockholders. In selecting candidates for appointment or re-election to the Board, the Corporate Governance and Nominating Committee of the Board considers the following criteria: (i) personal and professional ethics and integrity, including a reputation for integrity and honesty in the business community; (ii) experience as an executive officer of companies or as a senior leader of complex organizations, including scientific, government, financial or technological organizations; (iii) financial knowledge, including an understanding of finance, accounting, the financial reporting process, and company measures for operating and strategic performance; (iv) ability to critically and independently evaluate business issues, contributing diverse perspectives or viewpoints, and making practical and mature judgments; (v) a genuine interest in the Company, and the ability to spend the time required to make substantial contributions as a director; and (vi) no conflict of interest or legal impediment that would interfere with the duty of loyalty to the Company and its stockholders. In addition, the Corporate Governance and Nominating Committee reviews the qualifications of the directors to be appointed to serve as members of the Audit Committee to ensure that they meet the financial literacy and sophistication requirements under the NASDAQ rules and that at least one of them qualifies as an “audit committee financial expert” under the rules of the SEC.
The Audit Committee currently consists of Xiaoping Guo, Zhongli Liu and LuLu Sun, each of whom is independent under NASDAQ listing standards. Zhongli Liu serves as chairman of our Audit Committee.
The Board determined that Mr. Liu qualifies as an “audit committee financial expert,” as defined by NASDAQ Rule 5605(a)(2) and Item 407 of Regulation S-K. In reaching this determination, the Board made a qualitative assessment of Mr. Liu’s level of knowledge and experience based on a number of objective and subjective factors, including formal education, financial and accounting acumen, and business experience. The Audit Committee is responsible for assisting the Board in fulfilling its oversight responsibilities with respect to: (i) the financial reports and other financial information provided by us to the public or any governmental body; (ii) our compliance with legal and regulatory requirements; (iii) our systems of internal controls regarding finance, accounting and legal compliance that have been established by management and the Board; (iv) the qualifications and independence of our independent registered public accounting firm; (v) the performance of our internal audit function and the independent registered public accounting firm; and (vi) our auditing, accounting and financial reporting processes generally. The Audit Committee has been established in accordance with Section 3(a)(58)(A) of the Exchange Act. In connection with its responsibilities, the Board has delegated to the Audit Committee the authority to select and hire our independent registered public accounting firm and determine their fees and retention terms. The Audit Committee’s policy is to pre-approve all audit and non-audit services by category, including audit-related services, tax services, and other permitted non-audit services. In accordance with the policy, the Audit Committee regularly reviews and receives updates on specific services provided by our independent registered public accounting firm. All services rendered by MJF and Associates, APC to the Company are permissible under applicable laws and regulations. During fiscal year 2019, all services requiring pre-approval and performed by the Company’s accounting firm, MJF and Associates, APC, were approved in advance by the Audit Committee in accordance with the pre-approval policy. The Audit Committee operates under a written charter, which is available on our website at www.creg-cn.com under the links “Investor Relations – Corporate Governance.”
The Compensation Committee currently consists of Xiaoping Guo, Zhongli Liu and LuLu Sun. Mr. Guo is the chairman of our Compensation Committee. The Compensation Committee’s purpose is (i) to oversee the Company’s efforts to attract, retain and motivate members of the Company’s senior management team, (ii) to carry out the Board’s overall responsibility relating to the determination of compensation for all executive officers, (iii) to oversee all other aspects of the Company’s compensation policies, and to oversee the Company’s management resources, succession planning and management development activities. The Compensation Committee has the authority to engage independent advisors to assist it in carrying out its duties. During fiscal year 2019, the Compensation Committee did not engage the services of any independent advisors, experts or other third parties. We believe that the functioning of our Compensation Committee complies with any applicable requirements of NASDAQ and SEC rules and regulations. The Compensation Committee operates under a written charter, which is available on our website at www.creg-cn.com under the links “Investor Relations – Corporate Governance.”
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
All members of the Compensation Committee are independent directors. No current member of our Compensation Committee is a current or former officer or employee of the Company or any of its subsidiaries, and no director or executive officer of the Company is a director or executive officer of any other corporation that has a director or executive officer who is also a director of the Company.
Stockholder Communication with the Board of Directors
Stockholders may communicate with the Board by writing to the attention of Mr. Yongjiang (Jackie) Shi, our Chief Financial Officer, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China.
DIRECTOR COMPENSATION FOR 2019 FISCAL YEAR
Director Compensation Table
The following table sets forth summary information concerning the total compensation paid to our non-employee directors for services to the Company during the fiscal year ended December 31, 2019. Directors who are also our employees receive no additional compensation for their services as directors.
Fees Earned or Paid in
|Stock Awards||Option Awards|
Non-Equity Incentive Plan
|All Other Compensation||Total|
|LuLu Sun (2)||$||12000||$||12000|
|Xiaoping Guo (3)||$||12000||$||12000|
|Xiaogang Zhu (3)||$||12000||$||12000|
|1.||In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties to the Company, as well as the skill level required to serve as a director and manage the affairs of the Company. Each non-employee director receives a annual Board fee of RMB 50,000. Non–employee directors do not receive additional fees for attendance at Board or Board committee meetings or for serving on Board Committees. There were no stock options granted and exercised by non-employee directors during the 2019 fiscal year. There were no option awards outstanding as of December 31, 2019, for any of the non-employee directors.|
|2.||Ms. LuLun Sun was appointed to the Board on August 5, 2015.|
|3.||Messrs. Guo and Zhu were appointed as directors effective June 1, 2017. Mr. Zhu resigned from the Board effective March 5, 2020.|
Subsequent to December 31, 2019, On March 6, 2020, Zhongli Liu was appointed to the Board of Directors. In connection with his appointment, the Company executed an agreement with Mr. Liu pursuant to which the Company will compensate Mr. Liu for his services as a director in the amount of 50,000 RMB per year. The agreement also contains customary confidentiality and non-compete provisions.
A plurality of the shares present or represented by proxy at the 2020 Annual Meeting and entitled to vote on the election of directors will be required to elect Board nominees. Abstentions and broker non-votes, if any, are not votes cast and will have no effect on the election of directors. Stockholders cannot vote for a greater number of persons than the number of nominees named. The cumulation of votes in the election of directors is not permitted.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE ABOVE-LISTED NOMINEES.
RATIFICATION OF THE SELECTION OF OUR AUDITORS
The Audit Committee, in accordance with its charter and authority delegated to it by the Board, has appointed the firm of Prager Metis, CPAs LLC to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2020, and the Board has directed that such appointment be submitted to our stockholders for ratification at the 2020 Annual Meeting. Prager Metis, CPAs LLC has served as our independent registered public accounting firm since July 15, 2019 and is considered by our Audit Committee to be well qualified.
A representative of Prager Metis, CPAs LLC will participate in the 2020 Annual Meeting by phone and will have an opportunity to make a statement if they desire to do so. They also will be available to respond to appropriate questions from stockholders.
The affirmative vote of the holders of shares having a majority of the votes cast by the holders of the shares present or represented and voting at the 2020 Annual Meeting will be required to approve the ratification of the appointment of Prager Metis, CPAs LLC’s registered public accounting firm for the fiscal year ending December 31, 2020. Abstentions and broker non-votes, if any (although none are expected to exist in connection with this Proposal since this is a routine matter for which brokers may vote in their discretion if beneficial owners of our stock do not provide voting instructions to the brokers) are not votes cast and will have no effect on the vote for the proposal. If our stockholders fail to ratify the appointment of Prager Metis, CPAs LLC, the Audit Committee will reconsider whether to retain that firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in our best interest and the best interests of our stockholders.
THE BOARD, UPON THE RECOMMENDATION OF THE AUDIT COMMITTEE, RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL AND RATIFICATION OF Prager Metis, CPAs LLC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR ENDING DECEMBER 31, 2020.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit and Non-Audit Fees
After the resignation of MJG & Associates, APC on July 15, 2019, our Audit Committee selected Prager Metis as the independent registered certified public accounting firm to audit the books and accounts of our Company and subsidiaries for the fiscal year ending December 31, 2019. MJF & Associates has served as our independent accountant from January 12, 2015 until July 15, 2019. The following table presents the aggregate fees billed for professional services rendered to us for the fiscal year ended December 31, 2019 by Prager Metis and for the fiscal year ended December 31, 2018 and for a period from January 1, 2019 through July 15, 2019 by MJF & Associates.
The aggregate fees and expenses included in the Audit category are fees and expenses billed for the fiscal years for the audit of our annual financial statements and review of our interim financial statements and statutory and regulatory filings. The aggregate fees and expenses included in each of the other categories are fees and expenses billed in the fiscal years.
MJF & Associates, APC
|All Other Fees||—||—|
Prager Metis CPA
|All Other Fees||—||—|
Audit Fees for the fiscal years ended December 31, 2019 and 2018 were for professional services rendered for the audit of our annual financial statements and of our internal control over financial reporting and quarterly review of the financial statements included in our Quarterly Reports on Form 10-Q.
Audit-Related Fees are fees not included in audit fees that are billed by the independent accountant for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements, which include audits in connection with acquisitions.
Tax Fees are fees billed by the independent accountant for professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees are fees billed by the independent accountant for products and services not included in the foregoing categories.
The Audit Committee of the Board of Directors has determined that the provision of these services is compatible with the maintenance of the independence of Prager Metis CPAs LLC and MJF and Associates, APC.
Pre-approval Policies and Procedures
The Audit Committee has adopted a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. The pre-approval policy is detailed as to the particular service or category of services and is subject to a specific budget. The services include the engagement of the independent registered public accounting firm for audit services, audit-related services, and tax services.
If we need to engage the independent registered public accounting firm for other services, which are not considered subject to the general pre-approval as described above, then the Audit Committee must approve such specific engagement as well as the projected fees. If the timing of the project requires an expedited decision, then the Audit Committee has delegated to the Chairman of the Committee the authority to pre-approve such engagement, subject to fee limitations. The Chairman must report all such pre- approvals to the entire Audit Committee for ratification at the next Audit Committee meeting.
REPORT OF THE AUDIT COMMITTEE 1
The Audit Committee is a standing committee of the Board, which met four times during the fiscal year ended December 31, 2019. The Audit Committee currently consists of three members: Zhongli Liu (Chairman), Xiaoping Guo, and LuLu Sun, each of whom is independent under NASDAQ listing standards. The Board has designated Mr. as the “audit committee financial expert,” as defined by NASDAQ Rule 5605(a)(2) and Item 407 of Regulation S-K. In reaching this determination, the Board made a qualitative assessment of Mr. Liu’s level of knowledge and experience based on a number of objective and subjective factors, including formal education, financial and accounting acumen, and business experience. The Audit Committee assists, advises and reports regularly to the Board in fulfilling its oversight responsibilities related to:
|●||the integrity of the Company’s financial statements;|
|1||The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not incorporated by reference in any filing of the Company under the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.|
1 The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not incorporated by reference in any filing of the Company under the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
|●||the Company’s compliance with legal and regulatory requirements;|
|●||the independent auditor’s qualifications and independence; and|
|●||the performance of the Company’s outside auditors.|
In meeting its responsibilities, the Audit Committee is expected to provide an open channel of communication with management, the outside auditors and the Board. The Audit Committee’s specific responsibilities are set forth in its charter.
The Audit Committee has reviewed and discussed the Company’s audited consolidated balance sheet as of December 31, 2019 and consolidated statements of income, cash flows and stockholders’ equity for the year ended December 31, 2019 with the Company’s management. The Audit Committee has discussed with Prager Metis CPAs LLC, the Company’s independent auditors, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.
The Audit Committee has also received and reviewed the written disclosures and the letter from Prager Metis CPAs LLC required by the applicable requirements of the PCAOB regarding Prager Metis CPAs LLC’s communications with the Audit Committee concerning independence and has discussed with Prager Metis CPAs LLC its independence.
Based on the foregoing review and discussions, the Audit Committee recommended to the Board to include audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on May 14, 2020.
This report is submitted on behalf of the Audit Committee.
|Members of the Audit Committee:|
|Zhongli Liu, Chairman|
EXECUTIVE OFFICERS WHO ARE NOT IDRECTORS
|Name||Age||Position||Service as an Officer Since|
|Yongjiang (Jackie) Shi||45||Chief Financial Officer and Vice President||2019|
|Binfeng (Adeline) Gu||42||Secretary||2016|
Mr. Yongjiang (Jackie) Shi was appointed as our Chief Financial Officer and a Vice President, effective on December 20, 2019. Mr. Shi has served as the financial consultant to the Board since September 28, 2016 and was the CFO of the Company from May 16, 2015 to September 27, 2016. Mr. Shi was the Assistant CFO & Vice President in charge of finance for the Company from January 2015 to May 2015. Mr. Shi joined Xi’an TCH Energy Technology Company, Ltd., a wholly owned subsidiary of the Company in 2014 as a VP of Finance and he previously worked as the Director of Investor Relations for Xilan Natural Gas Group from 2005 to 2014. Mr. Shi studied professional accounting at the University of New South Wales, Australia from 2001 to 2003, and was awarded his master’s degree of finance in 2003. He studied public administration at Northwest University of China from 1994 to 1998, and obtained his bachelor’s degree in law in 1998.
Ms. Adeline Gu was appointed as the Company’s Chief Financial Officer and Secretary on September 28, 2016. Ms. Gu resigned as our Chief Financial Officer as of December 13, 2019. Ms. Gu has been serving as the director of the office of Board of Directors of the Company from August, 2012 to September 27, 2016. She was the Investor Relations Director from December 2007 to August 13, 2012 and Investor Relations Director Assistant from March 2006 to December 2007 of China Natural Gas, Inc. From October 2005 to March 2006, Ms. Gu was the Interpreter of Xi’an Equity Exchange & Shaanxi Watson Biology Gene Technology Co., Ltd. Ms. Gu studied at Northwest University of China from September, 1995 to June, 1999 and received her bachelor degree, majoring in English. Ms. Gu has held a Chinese Accounting Certificate since 2000.
Summary Compensation Table
The Company is subject to disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act. The following table summarizes the compensation earned during the years ended December 31, 2019 and 2018, by those individuals who served as our Chief Executive Officer, or Chief Financial Officer during any part of fiscal year 2019 and our other most highly compensated executive officer. The individuals listed in the table below are referred to as the “named executive officers.”
|Name and Principal||Salary||Bonus||Stock Awards||Option Awards||Non-Equity Incentive Plan Compensation||All Other Compensation|
|Guohua Ku (1)||2019||33,078||—||—||—||—||($)||33,078|
Chief Executive Officer and Chairman of the Board
|Adeline Gu (2)||2019||22,648||—||—||—||—||—||22,648|
|Officer and Secretary|
|1.||Guohua Ku was appointed as Chief Executive Officer of the Company on December 10, 2008.|
|2.||Adeline Gu was appointed as Chief Financial Officer and Secretary of the Company on September 28, 2016. On December 13, 2019, Ms. Gu resigned as our Chief Financial Officer.|
Narrative to Summary Compensation Table
During the 2019 fiscal year, we used base salary as the exclusive executive compensation to our executive officers. We use base salary to fairly and competitively compensate our executives, including the named executive officers, for the jobs we ask them to perform. We view base salary as the most stable component of our executive compensation program, as this amount is not at risk. We believe that the base salaries of our executives should be targeted at or above the median of base salaries for executives in similar positions with similar responsibilities at comparable companies, consistent with our compensation philosophy. Because of our emphasis on performance-based compensation for executives, base salary adjustments are generally made only when we believe there is a significant deviation from the market or an increase in responsibility. Our Compensation Committee reviews the base salary levels of our executives each year to determine whether an adjustment is warranted or necessary.
Mr. Guohua Ku entered into an employment agreement with the Company to serve as its CEO on December 10, 2008. The agreement had a two-year term, starting December 10, 2008, that included a one-month probationary period. In accordance with the terms and conditions of Mr. Ku’s employment agreement, on December 10, 2010, 2014, December 10, 2016, and, more recently, on December 10, 2018, the Company and Mr. Ku agreed to renew Mr. Ku’s employment agreement for an additional two-year term. Mr. Ku receives a salary of RMB 216,000 ($33,078) annually for his service as CEO. The Company may terminate the employment agreement at any time without any prior notice to the employee if Mr. Ku engages in certain conduct, including, but not limited to (i) the violation of the rules and procedures of the Company or breaches the terms of the employment agreement; (ii) neglecting his duties or engages in malpractice for personal gain that damages the Company; (iii) entering into an employment relationship with any other employer during his employment with the Company; or (iv) the commission of a crime. The Company also may terminate the employment agreement upon 30 days written notice to Mr. Ku under certain other conditions, including but not limited to (i) inability to continue position due to non-work-related sickness or injury; (ii) incompetence; and (iii) the need for mass layoffs or other restructuring. Mr. Ku has the right to resign at any time upon a 30-day written notice to the Company.
Mr. Yongjiang (Jackie) Shi entered into an employment agreement with the Company on May 8, 2020, in connection with his appointment to serve as the Chief Financial Officer and Vice President of the Company. Pursuant to the terms of Mr. Shi’s employment agreement, he receives a cash compensation in the amount of RMB 16,000 (approximately $2,300) per month for his service as the CFO and Vice President and is also entitled to receive an annual equity award of at least 5,000 shares of common stock of the Company. The term of the employment agreement is for 24 months and may be renewed for an additional term by the Company upon 30-day notice prior to its termination. This employment agreement may be terminated by the Company or Mr. Shi at any time without any prior notice.
The Company entered into an employment agreement with Ms. Gu on September 28, 2016 for her service to the Company as Chief Financial Officer and Secretary. This agreement was renewed for an additional two years and was terminated on September 28, 2020. Pursuant to the terms of the employment agreement, Ms. Gu received an annual salary of RMB 144,000 ($22,052). On April 27, 2017, the Compensation Committee approved the grant of an option to Ms. Gu to purchase 500 shares. On December 13, 2019, Ms. Gu resigned as our Chief Financial Officer.
Employment Offer Letters, Severance and Change in Control Arrangements in Effect During Fiscal Year 2019
Certain of our executive officers, including our CEO, have employment agreements with the Company. Under Chinese law, we may only terminate employment agreements without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreement is scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment agreement in the absence of cause, as defined in the agreement, then we are obligated to pay the employee one month’s salary for each year we have employed the employee. We are, however, permitted to terminate an employee for cause without penalty pursuant to the employment agreement. Other than as set forth above, we do not have written employment agreements or offer letters with our named executive officers.
In June of 2015, the stockholders of the Company approved the China Recycling Energy Corporation Omnibus Equity Plan (the “Plan”) at its annual meeting. The total aggregate shares of common stock authorized for issuance during the term of the 2015 Equity Plan is 124,626 shares of the Company’s authorized shares of Common Stock, as adjusted for the one-for-ten reverse stock split, effected on April 13, 2020. The 2015 Equity Plan will terminate on the earliest to occur of (i) the 10th anniversary of the Equity Plan’s effective date, or (ii) the date on which all shares available for issuance under the Equity Plan shall have been issued as fully-vested shares. We have not granted any options to purchase shares of our common stock under the 2015 Equity Plan during the 2019 fiscal year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information provided to us by each of the following as of November 10, 2020 (unless otherwise indicated) regarding their beneficial ownership of our common stock:
|●||each person, entity or group (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;|
|●||each of our directors and named executive officers; and|
|●||all of our directors and named executive officers as a group|
Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person directly or indirectly has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to dispose or direct the disposition of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary interest. . The address for each director and executive officer is 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, China 710075.
|Common Stock Beneficially Owned|
|Directors and Named Executive Officers|
|Yongjiang (Jackie) Shi||0||(1)||*|
|All executive officers and directors as a group (7 persons)||264,977||8.48||%|
|Great Essential Investment, Ltd. (3)||160,000||5.12||%|
|*||Less than one percent (1%) of outstanding shares.|
|1.||Excludes at least 5,000 shares issuable to Mr. Shi annually pursuant to the term of his employment agreement with the Company.|
|2.||Represents 500 shares of common stock subject to currently exercisable stock options.|
|3.||The address for Great Essential Investment, Ltd. is Akara Building, 24 De Castro Street, Wickhams Cay 1, Road Town Tortola, British Virgin Islands.|
EQUITY COMPENSATION PLAN INFORMATION
During the fiscal year ended December 31, 2019, we have not issued any shares of common stock under the Plan.
Code of Ethics
We have adopted a “code of ethics” as defined by regulations promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act that applies to all of our directors and employees worldwide, including our principal executive officer, principal financial officer and principal accounting officer. A current copy of our Code of Business Conduct and Ethics is available on our website at www.creg-cn.com under the links “Investor Relations — Corporate Governance.” We intend to disclose any amendments to the Code of Business Conduct and Ethics, as well as any waivers for executive officers or directors, on our website.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our executive officers, directors and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on our review of the copies of these reports, we believe that all filing requirements of Section 16(a) of the Exchange Act were timely complied with during the fiscal year ended December 31, 2019, except that Mr. Yongjiang (Jackie) Shi filed his Form 3 late.
Certain Relationships and Related Transactions
The Company has not implemented a written policy concerning the review of related party transactions; however, the Company’s policy is that the Audit Committee must review related party transactions and Board must approve all related party transactions. Further, all material related party transactions will be made or entered into on terms that are no less favorable to us than can be obtained from unaffiliated third parties.
A “related party transaction” is a transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which the Company (including any of our subsidiaries) was, is or will be a participant, the amount involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect interest.
On December 29, 2018, the Company’s Chairman of the Board and CEO, Guohua Ku, entered into a Buy-Back Agreement with the following parties: Xi’an TCH, Xi’an Zhonghong, HYREF, Chonggong Bai and Xi’an Hanneng Enterprises Management Consulting Co. Ltd. (“Xi’an Hanneng”). Pursuant to the terms of the Buy Back Agreement, Mr. Ku, together with Xi’an TCH, Xi’an Zhonghong, and Chonggong Bai, as Buyers, jointly and severally agreed to buy back all outstanding capital equity of Xi’an Hanneng which was transferred to HYREF by Chonggong Bai, and a CDQ WHPG station in Boxing County which was transferred to HYREF by Xi’an Zhonghong. Pursuant to the terms of the Buy-Back agreement, HYREF may request that the Buyers buy back the equity shares of Xi’an Hanneng and/or the CDQ WHPG station if one of the following conditions is met: (i) HYREF holds the equity shares of Xi’an Hanneng until December 31, 2021; (ii) Xi’an Huaxin New Energy Co., Ltd., is delisted from The National Equities Exchange And Quotations Co., Ltd., a Chinese over-the-counter trading system (the “NEEQ”); (iii) Xi’an Huaxin New Energy, or any of the Buyers or its affiliates has a credit problem, including not being able to issue an auditor report or standard auditor report or any control person or executive of the Buyers is involved in crimes and is under prosecution or has other material credit problems, to HYREF’s reasonable belief; (iv) if Xi’an Zhonghong fails to timely make repayment on principal or interest of the loan agreement, its supplemental agreement or extension agreement; (v) the Buyers or any party to the Debt Repayment Agreement materially breaches the Debt Repayment Agreement or its related transaction documents, including but not limited to the Share Transfer Agreement, the Pledged Assets Transfer Agreement, the Entrusted Loan Agreement and their guarantee agreements and supplemental agreements. Due to halted trading of Huaxin stock by NEEQ for not filing its 2018 annual report, on December 19, 2019, Xi’an TCH, Xi’an Zhonghong, Guohua Ku and Chonggong Bai jointly and severally agreed to buy back all outstanding capital equity of Xi’an Hanneng which was transferred to HYREF by Chonggong Bai earlier. The total buy back price was RMB 261,727,506 ($37.52 million) including accrued interest of RMB 14,661,506 ($2.10 million), and was paid in full by Xi’an TCH.
NO DISSENTERS’ RIGHTS
The corporate action described in this Proxy Statement will not afford stockholders the opportunity to dissent from the actions described herein or to receive an agreed or judicially appraised value for their share
A copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which has been filed with the SEC pursuant to the Exchange Act, is being mailed to you along with this Proxy Statement. Additional copies of this Proxy Statement and/or the Annual Report, as well as copies of any Quarterly Report may be obtained without charge upon written request to Ms. Adeline Gu, our Secretary, at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China, or on the SEC’s internet website at www.sec.gov.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
Our Board knows of no matters other than those referred to in this Proxy Statement and in the accompanying Notice of Annual Meeting of Stockholders. However, if any other matter should be properly presented for consideration and voting at the 2020 Annual Meeting, it is the intention of the persons named as proxies on the enclosed form of proxy card to vote the shares represented by all valid proxy cards in accordance with their judgment of what is in our best interest.
NOTICE REGARDING DELIVERY OF STOCKHOLDER DOCUMENTS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports by delivering a single copy of these materials to an address shared by two or more CREG’s stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies and intermediaries. A number of brokers and other intermediaries with account holders who are our stockholders may be householding our stockholder materials, including this Proxy Statement. In that event, a single proxy statement, as the case may be, will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or other intermediary that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent, which is deemed to be given unless you inform the broker or other intermediary otherwise when you receive or received the original notice of householding. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, please notify your broker or other intermediary to discontinue householding and direct your written request to receive a separate proxy statement to us at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China, or by calling us at 1-800-690-6903 (toll-free). Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications should contact their broker or other intermediary.
STOCKHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING
Stockholders who intend to present proposals at the 2021 Annual Meeting of Stockholders under SEC Rule 14a-8 must ensure that such proposals are received by the Secretary of the Company not later than April 30, 2021. Stockholder notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on our books, of the stockholder proposing such business, (iii) the class and number of shares of CREG, which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Exchange Act, in his capacity as a proponent to a stockholder proposal.
The Board will also consider nominees recommended by stockholders. The Company’s Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board at our Annual Meeting of Stockholders. The procedures include a requirement that notices regarding a person’s nomination be received in writing from the stockholder and by the Company’s Secretary not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. Moreover, the notice must include such nominee’s written consent to be named in the Company’s Proxy Statement and to serve if elected. Supporting information should include: (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of CREG, which are beneficially owned by such person, (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person(s) (naming such person(s)) pursuant to which the nominations are to be made by the stockholder and (v) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such person’s written consent to being named in our Proxy Statement, if any, as a nominee and to serving as a director if elected). A proposal which is received after that date or which otherwise fails to meet the requirements for stockholder proposals established by our Bylaws, the Exchange Act and the SEC will not be included. The submission of a stockholder proposal does not guarantee that it will be included in the proxy statement. You are advised to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. You must comply with these Bylaws requirements in connection with a stockholder proposal or director nomination outside the Rule 14a-8 context. A copy of the full text of the provisions of our Bylaws, dealing with stockholder proposals is available to stockholders from our Secretary upon written request and an electronic copy of is available at the SEC’s website located at www.sec.gov.
Proposals and notices of intention to present proposals at the 2021 Annual Meeting should be addressed to Ms. Adeline Gu, our Secretary, at our principal executive offices, located at 4/F, Tower C, Rong Cheng Yun Gu Building, Keji 3rd Road, Yanta District, Xi’an City, Shaanxi Province, 710075 China.
YOUR VOTE IS IMPORTANT
You are cordially invited to attend the 2020 Annual Meeting. However, to ensure that your shares are represented at the meeting, please submit your proxy or voting instructions by mail. Please see the instructions on the proxy and voting instruction card. Submitting a proxy or voting instructions will not prevent you from attending the 2020 Annual Meeting and voting in person, if you so desire, but will help the Company secure a quorum and reduce the expense of additional proxy solicitation.
|By Order of the Board of Directors|
|/s/ Guohua Ku|
|Chief Executive Officer and|
|Chairman of the Board of Directors|
|Xi’an City, Shaanxi Province, China|
Xi’an City, Shaanxi Province, China
November 10, 2020