Analysis Report on the Stability of Controlling Rights of Bairuiji's Actual Controller

Based on the public information I have collected, I will provide you with a detailed analysis of the stability of the controlling rights held by the actual controller of Bairuiji.

According to the disclosure in the Prospectus (Draft for Submission) of Changzhou Bairuiji Biopharmaceutical Co., Ltd.:

• Shu Xiaozheng directly holds
  27.84%
  of the company’s shares
• Indirectly controls
  4.51%
  of the shares through the employee shareholding platforms Changzhou Xinyue and Changzhou Xinli
• Controls a total of 32.36% of the voting rights corresponding to the shares
  [1]

If 10,588,300 shares are issued in this offering (with the over-allotment option fully exercised), after the issuance:

• Shu Xiaozheng’s direct shareholding ratio will be diluted to
  23.67%
• The total proportion of voting rights under his control will be diluted to
  27.50%
  [2]

According to the provisions of Legal Application Opinion No. 17 on Securities and Futures:

“Where the issuer’s shares are relatively dispersed but a

single shareholder holds a controlling stake of 30% or more

, in the absence of contrary evidence, such shareholder shall be recognized as the controlling shareholder or actual controller in principle.”[3]

In addition, Article 84 of the Measures for the Administration of Acquisitions of Listed Companies stipulates:

“One of the circumstances in which an investor has controlling rights over a listed company is that the investor can actually dispose of

more than 30%

of the voting rights attached to the shares of the listed company.”[3]

The 32.36% voting right ratio just exceeds the 30% threshold, which meets the statutory criteria for recognizing controlling rights, and the status of the actual controller is confirmed at the regulatory level.

Shareholder	Pre-Issuance Shareholding Ratio	Post-Issuance Shareholding Ratio
Shu Xiaozheng (including persons acting in concert)	32.36%	27.50%
Changchuang Changzhou	6.97%	5.93%
Sanjiang Longcheng Yingcai	5.82%	4.95%
Fujian Songde	5.72%	4.86%
Shanghai Purun	4.72%	4.01%
Total of Other Shareholders	31.23%	26.54%

All other shareholders have low and dispersed shareholding ratios, and no single shareholder can form an effective challenge.[2]

Shu Xiaozheng serves as the company’s , and has actual control over daily operations and major decisions.

• The 32.36% ratio is significantly far from the 50% threshold for absolute control
• For votes on major matters (such as amending the articles of association, increasing/reducing registered capital, merger and division) which require a two-thirds majority approval, the
  supporting voting rights account for only about 48.5%
  (32.36% ÷ 2/3), leading to the risk of rejection

• After the issuance, the controlling rights will drop to 27.50%,
  which is below the 30% threshold for recognizing controlling rights
• This may lead to regulatory re-examination of its status as the actual controller

• Theoretically, an external acquirer can acquire approximately
  18% of the shares
  through the secondary market or negotiated transfer to exceed the shareholding of the actual controller
• The company’s dispersed shareholding structure provides room for hostile takeovers

• Dongzheng Xiade and Dongzheng Tangde form a
  concerted action relationship
  , holding a total of 6.21% of the shares
• Changchuang Angel and Changchuang Changzhou form a
  concerted action relationship
  , holding a total of 7.92% of the shares

If these shareholders act in concert, they may challenge the status of the actual controller.[2]

The 32.36% controlling rights held by Bairuiji’s actual controller are in a state of

:

Dimension	Assessment
Regulatory Compliance	✅ Exceeds the 30% threshold for recognizing controlling rights
Shareholding Dispersion	✅ Other shareholders have dispersed shareholdings, no single challenger
Absolute Control	⚠️ Gap from absolute control (50%)
Dilution Risk	⚠️ Will drop to 27.50% after issuance
Acquisition Defense	⚠️ Risk of being overtaken

1. Low Marginal Effect of Controlling Rights
   : The 32.36% shareholding ratio can only provide limited protection in decision-making on major matters
2. Dilution Risk from Issuance
   : The ratio of controlling rights will fall below the 30% regulatory red line after the issuance
3. Potential Risk of Concerted Action
   : If other shareholders form a concerted action relationship, they may shake the status of the actual controller
4. Possibility of External Acquisition
   : The dispersed shareholding structure creates conditions for hostile takeovers

For investors who are interested in the company, it is recommended to focus on the following:

• Whether the actual controller has adopted defensive measures (such as amending the articles of association, implementing a poison pill plan, etc.)
• Whether the actual controller commits to increasing shareholdings to maintain controlling rights after the issuance
• The attitudes of other major shareholders and potential concerted action relationships
• The mechanism arrangements in the company’s governance structure to protect minority shareholders

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[1] Prospectus (Draft for Submission) of Changzhou Bairuiji Biopharmaceutical Co., Ltd. - Eastmoney (https://pdf.dfcfw.com/pdf/H2_AN202412261641439039_1.pdf)
[2] Response to the Audit Inquiry Letter for the Public Issuance of Shares by Changzhou Bairuiji Biopharmaceutical Co., Ltd. (https://pdf.dfcfw.com/pdf/H2_AN202512021792591875_1.pdf)
[3] Jingtian & Gongcheng Law Firm - Recognition of Controlling Shareholders and Actual Controllers of Listed Companies (https://www.jingtian.com/Content/2023/05-22/1515523255.html)