QEX penalties put directors’ financial reporting duties in the spotlight

A New Zealand court has imposed civil penalties on QEX Logistics Limited – a company formerly listed on the New Zealand Stock Exchange – together with its founder, chief executive and sole director, Jingjie Xue, for failing to file its financial statements with the Companies Office over several years.

The decision marks the first time the Financial Markets Authority (FMA) has brought civil proceedings for breaches of financial reporting obligations. 

Background

QEX Logistics was listed on the NZXT Market in February 2018 and migrated its share listing to the NZX Main Board in October of that year. While listed, it offered its shares to investors and was regulated under the Financial Markets Conduct Act 2013 (FMCA). As a listed issuer, it was also subject to the NZX Listing Rules.

In February 2021, QEX Logistics was placed on a trading halt after its independent directors resigned. This left it with only one director and meant it no longer met the board composition requirements set out in the NZX Listing Rules.

It was later found to have breached its continuous disclosure requirements in October 2021 and again in February 2022. These breaches included not disclosing its interim and full-year financial results, and failing to notify the market of material information in a timely manner.

Due to its breaches of the listing rules, QEX Logistics was delisted from the NZX in April 2022. 

FMA proceedings

As a listed company, QEX Logistics was an FMC reporting entity and therefore required to prepare and lodge audited financial statements that complied with generally accepted accounting practice with the Financial Service Providers Registrar within four months of its balance date each year.

QEX Logistics failed to file its financial statements for the 2021, 2022 and 2023 financial years, which contributed to NZX’s decision to delist the company.

As a result of the failure to file financial statements, the FMA brought proceedings in October 2024 alleging breaches of the following provisions of the FMCA: 

• • Section 461, which requires FMC reporting entities to prepare group financial statements
  • Section 461H, which requires financial statements to be lodged with the Financial Service Providers Registrar. 
  • Section 534, which treats directors as having contravened the FMCA where there is a breach of financial reporting obligations 

In April 2026, the court imposed civil penalties of $875,000 on QEX Logistics and $175,000 on Xue. Xue was also banned from serving as a director of any FMC reporting entity for three years.

The significance

The FMA’s decision to bring proceedings and the significant penalties imposed by the court underscore the importance for businesses, particularly FMC reporting entities, of understanding and complying with their financial reporting obligations.

Directors, in particular, should also be aware that they are ultimately responsible for ensuring the accuracy and completeness of financial statements. A failure to comply with these obligations may leave them at risk of being held personally liable for a breach by the company, and potentially subject to financial penalties and/or disqualification from acting as a director.

These proceedings are indicative of a wider increased focus on ensuring compliance with financial reporting obligations. Businesses should be aware of this and take proactive steps to understand what, if any, financial reporting obligations apply to them in order to ensure compliance.