SCHEDULE: Lianhe Sowell Founders Consolidate Control

Key shareholders Dengyao Jia and Yue Zhu form an 'acting-in-concert' group, consolidating control over 65.8% of Lianhe Sowell International Group Ltd's voting shares.

Summary

• Dengyao Jia, Chairman and director, and Yue Zhu, CEO and director, along with their controlled entities, have formed an 'acting-in-concert' group.
• This group collectively holds beneficial ownership of 34,215,000 Ordinary Shares, representing approximately 65.8% of Lianhe Sowell International Group Ltd's total outstanding shares.
• The Acting-in-Concert Agreement, dated September 9, 2025, formalizes their voting arrangement for matters related to the company's financials, operations, and management.
• Under the agreement, if a consensus cannot be reached, Lianyue Holding (controlled by Mr. Zhu) will vote in accordance with Patton Holding's (controlled by Mr. Jia) direction, with specific exceptions for illegal actions, charter violations, or fundamental impairment of interests.
• Patton Holding is also delegated authority to vote on behalf of Lianyue Holding.

Sentiment

Score: 6

Explanation: The filing indicates a significant consolidation of control by the Chairman and CEO, which can be positive for stable leadership but potentially negative for minority shareholder influence. The formalization of the 'acting-in-concert' agreement provides clarity on voting power.

Positives

• Consolidation of control by key management figures (Chairman and CEO) may lead to more stable and unified strategic direction.
• The formalization of voting arrangements can reduce internal conflicts regarding major corporate decisions.
• A clear majority voting bloc (65.8%) can facilitate quicker decision-making on strategic initiatives.

Negatives

• The significant consolidation of voting power (65.8%) by the acting-in-concert group could diminish the influence of minority shareholders.
• The agreement grants Patton Holding (controlled by Mr. Jia) a dominant voting position in the absence of consensus, potentially limiting Lianyue Holding's (controlled by Mr. Zhu) independent decision-making.
• The 'fundamental impairment of interests' clause for Lianyue Holding or other shareholders is a subjective exception, which could lead to disputes.

Risks

• Potential for decisions to be made that primarily benefit the controlling group, possibly at the expense of minority shareholders, despite the protective clauses.
• The subjective nature of 'fundamentally impairing interests' could lead to future disagreements or legal challenges regarding voting decisions.
• The concentration of control could make the company less attractive to new investors seeking more diversified governance structures.

Future Outlook

The reporting persons currently have no specific plans or proposals for extraordinary corporate transactions, changes in the board or management, material changes in capitalization or dividend policy, or other significant alterations to the Issuer's business or corporate structure. However, they reserve the right to formulate such plans or proposals at any time in the future.

Management Comments

• When the Parties discuss matters pertaining to the operation, management, and financial affairs of the Company, they shall communicate on an equal basis and seek consensus through consultation.
• In the event of a material disagreement between the Parties on any discussed matter that prevents a consensus from being reached, the vote of Party A [Patton Holding] shall prevail; provided, however, that this shall not apply if the resolution in question is illegal, violates the Company's articles of association, materially impairs the fundamental interests of Party B [Lianyue Holding] or other shareholders, or excludes or restricts the rights of Party B.

Industry Context

The formation of an 'acting-in-concert' group is a common strategy in corporate governance, particularly in companies with concentrated ownership, to formalize control and ensure unified voting on strategic matters. This move by Lianhe Sowell's Chairman and CEO aligns with a trend where founders or key shareholders seek to solidify their influence, which can be viewed positively for stability but raises questions about minority shareholder protections.

Comparison to Industry Standards

• The formation of an 'acting-in-concert' group to consolidate voting power is a recognized mechanism, often seen in companies where founders or significant shareholders wish to maintain control. For example, similar arrangements exist in various Asian markets where founding families or strategic partners pool their voting rights.
• The provision for Lianyue Holding to vote with Patton Holding in the absence of consensus, while including safeguards against illegal actions or fundamental impairment of interests, is a standard feature in such agreements to ensure a decisive outcome. However, the effectiveness of these safeguards depends on their interpretation and enforcement, which can be a point of contention for minority shareholders compared to more independent board structures in other public companies.
• The 65.8% combined ownership provides a strong majority, exceeding typical thresholds for special resolutions, which is comparable to control levels seen in many founder-led or family-controlled public companies globally, such as certain tech firms or industrial conglomerates.

Management Changes

Corporate Governance

Related Party Transactions

• The Acting-in-Concert Agreement itself is a related party transaction, entered into between entities controlled by the Chairman (Dengyao Jia) and CEO (Yue Zhu) of Lianhe Sowell International Group Ltd.

Stakeholder Impact

• Shareholders: Minority shareholders may experience reduced influence over corporate decisions due to the consolidated voting power of the acting-in-concert group. The agreement provides clarity on control but concentrates power.
• Management: The agreement formalizes and strengthens the control of the Chairman and CEO over the company's strategic direction and operational decisions.
• Creditors/Suppliers: No direct immediate impact, but increased stability in leadership could be viewed positively.

Next Steps

• The acting-in-concert agreement will remain in effect until terminated in writing by both parties or until Patton Holding ceases to be a shareholder of the Issuer.
• The reporting persons may, at any time, formulate other plans or proposals regarding the Issuer, including those related to acquisitions, dispositions, corporate transactions, management changes, or capitalization.

Key Dates

Recommendation

The filing primarily details a consolidation of control by key management through an 'acting-in-concert' agreement, which formalizes their existing influence. While this provides stability and unified decision-making, it also concentrates power, potentially reducing minority shareholder influence. There are no new financial results, strategic initiatives, or capital raises disclosed that would fundamentally alter the company's valuation or operational trajectory. Therefore, a 'hold' recommendation is appropriate as the filing clarifies governance structure without presenting new catalysts for significant upside or downside.

Keywords

Lianhe Sowell International Group Ltd, Schedule 13D, beneficial ownership, acting-in-concert, corporate governance, Dengyao Jia, Yue Zhu, voting agreement, shareholder group, control