In 2022, the new "Several Provisions on False Statements" came into effect. Our team promptly prepared a comprehensive interpretation that was widely acclaimed in the industry. Building on this, by integrating theory with practice, we handled a series of pioneering cases on stock false statement liability disputes following the implementation of the new judicial interpretations – all resulting in complete exoneration for our clients. These cases have set groundbreaking adjudicative benchmarks in terms of materiality, transactional causation, and the unique features of the NEEQ market.
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NEEQ: In a series of NEEQ-related false statement liability disputes, we represented the lead underwriting securities firm in the Fujian High Court against several investors' claims. We persuaded the court to take into account the unique characteristics of the NEEQ market and determine that the alleged false statements were not established and did not meet the materiality requirement, leading to the dismissal of all claims. Subsequently, we further represented our client at the Supreme Court, where the opposing party’s retrial application was dismissed.
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Materiality: In a series of false statement liability disputes involving stock nominee arrangements and share reductions, we represented a major shareholder of a listed company in courts such as the Chengdu Intermediate Court and the Suzhou Intermediate Court in defending against claims by shareholders. Even though our client had already been subjected to administrative penalties, our team focused on the element of "materiality" as the key breakthrough and raised multiple layers of defense, ultimately persuading the court to dismiss all of the plaintiff’s claims. In the current context where the preclusion procedure for civil claims in securities false statement cases has been cancelled, our advocacy approach and the resulting adjudicative principles in these cases are of significant illustrative value.
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Ongoing Supervision: In a series of stock false statement liability disputes, even after a listed company had been subject to administrative sanctions, we represented an independent financial advisor in the Beijing Financial Court against numerous claims brought by shareholders. These cases marked the first stock false statement dispute accepted by the Beijing Financial Court and were supported by small and medium-sized investment advisory firms. Ultimately, the court accepted our defense, emphasizing that during the ongoing supervision phase the securities firm was not at fault regarding the alleged false statements and therefore need not be held liable.

In recent years, defaults on bonds by large conglomerates have become commonplace, and post-bankruptcy, debt restructuring is often conducted through substantive consolidated bankruptcies. Some bond investors have retroactively scrutinized the bond issuance documents in such consolidations, alleging that issues such as the lack of corporate personality and the presence of false financial data constitute false statements in bond issuances – sparking some of the most significant legal controversies in the bond false statement field. Since 2018, our team has proactively focused on bond false statement liability disputes, thoroughly discussing the related controversies at the theoretical level and deepening our understanding through litigation practice.
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In one bond false statement liability dispute, we represented the lead underwriter in the second-instance proceedings at the Shaanxi High Court, completely overturning the first-instance defeat. Confronted with 16 alleged false statements raised by the plaintiff, our team exhaustively addressed each element, ultimately persuading the court that none of the plaintiff’s claims satisfied the requisite elements – including the argument against “reverse piercing” in consolidated bankruptcies – marking a national first. Our peers at Zhonglun highly praised the case, noting that "the judgment in this case is exemplary." Subsequently, we further represented our client at the Supreme Court, where the opposing party’s retrial application was dismissed.
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In another series of bond false statement liability disputes, we represented the lead underwriter in the Qingdao Intermediate Court against claims by multiple institutional investors. Our team successfully convinced the court to reject the plaintiff’s application to obtain consolidated bankruptcy materials and raised multiple layers of defense, leading the plaintiff to voluntarily withdraw the lawsuit.
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In a series of bond false statement liability disputes involving potential claims exceeding 10 billion RMB, we represented the lead underwriter in the Beijing First Intermediate Court. Owing to our defense strategy highlighting insufficient evidence from the plaintiff and various anomalies regarding the bond purchase, the plaintiff voluntarily withdrew the lawsuit.

With the rapid development of asset securitization in China, which has increasingly become significant, the new "Securities Law" of 2019 has once again clarified the legal nature of asset-backed securities. As financial regulation has grown more stringent and judicial principles have been refined, the civil liability risks of intermediary institutions in ABS transactions have become a critical aspect of the statutory responsibilities of financial institutions. Our team has achieved impressive results in both prosecuting and defending such cases.
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In one ABS fraud liability dispute, we represented a major state-owned bank in the Shanghai Financial Court, suing over fraudulent issuance behaviors related to the underlying assets and seeking compensation from the manager, law firm, rating agency, and financial advisor. Leveraging our solid understanding of securities law and practical securities operations, we detailed the issuance model and transaction structure of asset-backed securities before the court, employing multiple interpretative approaches to analyze provisions of the "Securities Law" and using extensive visual charts to illustrate the fraudulent asset fabrication model, ultimately achieving a favorable outcome. This case was the first of its kind in the nation involving ABS fraud liability disputes. Following the first-instance judgment, the case was published on the Shanghai Financial Court’s "Comprehensive Platform for Investor Judicial Protection" and attracted significant attention from Caixin Weekly, sparking a strong industry-wide reaction. The case was listed on the "2023 Outstanding Transactions – Domestic Dispute Resolution" ranking by Shangfa.
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In another ABS dispute regarding manager liability, we represented the manager in the Shenzhen International Arbitration Court in response to claims by institutional investors. The investors alleged that the manager had failed to diligently perform due diligence obligations, breached continuous disclosure requirements, and inadequately managed risk and default procedures. We addressed each allegation, and ultimately, the arbitration institution dismissed all of the institutional investors' claims. At a time when the liability of ABS managers is increasingly scrutinized, this case set a precedent by enabling the manager to secure an exemption from liability.

In this case, a bank subscribed to a collective fund trust plan actively managed by a trust company for an amount exceeding 200 million RMB, investing in a targeted private placement by a listed company. The bank contended that after the listed company’s shares were unlocked, the trust company failed to timely identify operational issues at the listed company and neglected to devise an exit strategy for the investment, ultimately failing to act in accordance with the draft plan provided by the trust manager. As a result, following the disclosure of significant operational issues at the listed company, both the trust assets and the bank incurred substantial losses.

Our team represented the bank by first filing a complaint with the regulatory authority, submitting detailed materials, and assisting in communications between the bank and the regulator to obtain regulatory opinions on the trust company. Subsequently, we represented the bank in achieving a first-instance victory at the Beijing Second Intermediate Court and a mediated settlement in the second-instance at the Beijing High Court. This judgment was the first publicly retrievable case in which an institutional investor successfully claimed that a trust company had failed to perform its duty of due diligence (rather than merely breaching a contractual obligation). The judgment broke with the previous adjudicative rule that claims could not be awarded without liquidation, marking the first such case in Beijing that is publicly accessible. In addition, the first-instance judgment was featured in the "China Commercial Dispute Resolution Annual Observation (2022)" published by the Beijing Arbitration Commission. Several well-known public accounts in the trust and asset management sector have distilled the adjudicative principles from this judgment as the standard for a trust company’s due diligence.

This case involved a dispute over an entrusted wealth management contract between two commercial banks, treated as a major case by both institutions. Our client, a major state-owned bank, was pitted against an agricultural and commercial bank. The opposing bank alleged that our bank’s staff had induced the other bank to purchase wealth management products and had illicitly obtained funds through criminal activities, causing significant losses to the opposing bank – thus holding our bank liable for the financial loss. This case involved overlapping criminal and civil matters, with our bank’s staff having committed contract fraud, which was disadvantageous to our client. Before our team’s intervention, our client had suffered complete defeats in both the first-instance at the Intermediate Court and the second-instance at the High Court, with the court declaring the wealth management contract invalid and ordering our client to fully return the funds and pay interest at the prevailing loan rate.

Our team then represented our client at the Supreme Court by applying for a retrial, efficiently prompting the Supreme Court to review the case and suspending the execution. Ultimately, our representation led to a reversal of the previous judgment, saving our client nearly 1 billion RMB in losses. This case, involving overlapping criminal-civil issues, provided valuable guidance on various judicial perspectives concerning contract invalidity, the determination of whether property should be returned or losses shared based on fault after contract invalidity, the standards for loss sharing, and interest calculation.

In this case, after the bill matured, the holder’s request for payment was refused, prompting the exercise of bill recourse rights. A certain bank, after fulfilling its bill payment obligations as an endorser, acquired the holder's rights and then exercised its right of recourse. The Supreme Court identified that the transaction involved a "reverse payment" behavior, and the dispute arose from a multi-chain financing model using bill discounting, necessitating the addition of other relevant parties in the financing chain, including the actual fund user, to resolve the dispute in one go. After the Supreme Court remanded the case for retrial, our client, acting as the manager of a designated asset management plan by the funding bank, was also listed as a co-defendant.

Our team represented the securities firm, acting as the manager of the designated asset management plan, in the re-trial proceedings at the Zhejiang High Court. We argued, on multiple levels including the litigation subject, the litigation subject matter, and the litigation requests, that the case constituted "duplicate litigation," and based on the establishment process of the asset management plan, clarified the role of the securities firm in the transaction. We advanced our defense from various angles including business compliance and transactional arrangements to assert our exemption. This case is one of the post-"Nine-Ministerial Memorandum" disputes involving hot issues such as "reverse payments" in bill discounting and recourse disputes. After the Supreme Court remanded the case for retrial, our team successfully obtained a complete victory for our client.

In this case, a company issued a blank guarantee contract bearing its official seal to a bank, and further discussed guarantee-related matters via telephone. After the borrower defaulted, the bank initiated a lawsuit in the first instance seeking repayment from the borrower and guarantee liability from the guarantor. The Beijing High Court did not support holding the guarantor, who had provided the blank guarantee contract, liable. However, this guarantor was the only entity within the bank’s recourse scope with the capacity to pay; the first-instance defeat would have resulted in our client facing losses exceeding 1 billion RMB.

Our team intervened in the second instance, representing the bank in the Supreme Court’s appellate proceedings. We focused on the interpretation of the intention expressed in the blank guarantee contract, meticulously organized the complex facts, and conducted extensive searches to filter useful information – including sifting through numerous recordings and emails, as well as analyzing extensive data regarding the relationship between the guarantor and the debtor as part of a community of interest. We also compiled scholarly materials and analogous case judgments. Ultimately, based on the interpretation of the expressed intentions and the burden of proof, we persuaded the Supreme Court to reverse the previous judgment and hold the guarantor liable, thereby saving our client over 1 billion RMB in losses. This case was selected as a typical example in the "Selected Cases of the Supreme People’s Court (Volume IV)."

This case involved a financing lease contract dispute with a claim exceeding 300 million RMB, between a financing leasing company and the debtor. A bank, holding a security interest in a property owned by the debtor, sought to join the litigation to confirm that the financing leasing company did not possess ownership or mortgage rights over the fixtures within the building. Previously, the second-instance judgment by the Supreme Court had determined findings unfavorable to the bank’s litigation objectives.

Our team represented the bank by intervening in the re-trial proceedings at the Xinjiang High Court as an independent third party with its own claim. We sought confirmation that the financing leasing company did not possess ownership or mortgage rights over the fixtures within the building. The team devised a litigation strategy that would not directly conflict with the prior Supreme Court ruling, carefully scrutinized the basis of the claim step by step, and methodically presented the arguments. These arguments included that the disposition of jointly owned parts was invalid, that the prior mortgage on the property applied similarly to the fixtures such that the leasing company lacked the authority to dispose of them, and that the division or mortgage of jointly owned parts would harm the interests of the property owners. By comprehensively applying the property rights principles related to fixtures within a building, we obtained the court’s support and fully achieved the bank’s litigation objectives. After the first-instance judgment, all parties accepted the ruling and did not file an appeal.

This case originated from the situation where the legal representative, without proper corporate authorization, signed an equity agreement (a quasi-bet agreement) with an investor, which subsequently led to litigation. The investor named the company as a defendant, demanding that the company repurchase the equity and assume compensation liability. Due to the legal representative’s unauthorized signing of several similar agreements, there were numerous potential disputes and substantial stakes involved. This case has demonstrative significance in showing how our client can smoothly handle the entire risk event arising from the legal representative’s misconduct.

Representing the target company, our team found, first, that the bet conditions had been formally met; second, that the company's asset condition was sufficient to complete the equity repurchase without necessarily harming the interests of creditors. Based on this, arguing solely that the company’s performance of the repurchase obligation would violate capital maintenance may not be a reliable defense. Therefore, our team primarily raised defenses based on contract interpretation, the attribution of agency effects, and the ultra vires actions of the representative. Both first and second-instance judgments accepted our viewpoint, dismissing all of the investor's claims on the basis most conducive to resolving the series of disputes, thereby properly mitigating the litigation risks arising from the legal representative’s misconduct.

In this case, our client – a privately owned enterprise among the world’s Fortune 500 companies – had its wholly-owned subsidiary engaged in trade that incurred external debts. External creditors included both our client and its subsidiary as defendants, arguing that as the sole shareholder of a one-person company, our client should bear the burden of proving that the company's assets were independent of its own; otherwise, the court should deem the assets commingled and deny the corporate personality, thereby holding our client jointly and severally liable for the subsidiary’s debts. In the first instance, our client submitted audit reports and other evidence, but the external creditors challenged the validity of the audit reports and commissioned other accountants to prepare dissenting opinions. Ultimately, the court found that our client and its wholly-owned subsidiary had commingled assets, denied the corporate personality, and held our client jointly liable.

Our team intervened at the appellate level, meticulously addressing the external creditors' challenges to the audit reports. We combined industry standards and accounting classifications to uncover relevant facts, and formulated a robust response. At the same time, we conducted an in-depth analysis of fundamental issues such as the institutional value of a one-person company shareholder proving corporate independence, the probative value of audit reports, and the correlation between accounting classifications and asset commingling. Our compelling explanations ultimately persuaded the Guangdong High Court on appeal that there was no asset commingling, and consequently, our client was not held jointly liable.