Case Review
In 2018, Lin, the actual controller of a state-owned shareholding company (hereinafter referred to as the “shareholding company”), was subject to mandatory measures on suspicion of multiple crimes including duty embezzlement and defrauding bank loans. After the state-owned shareholder of the shareholding company urgently took over the company, it was discovered that Lin, taking advantage of his position as the actual controller, arranged for the shareholding company to conduct connected transactions with his affiliated companies, damaging the company’s interests through extremely concealed means involving a huge amount of money. With the support of the state-owned shareholder, the shareholding company contacted HongQiao ZhengHan, hoping to immediately file a lawsuit against Lin and his affiliated parties for damaging the company’s interests through connected transactions.
Litigation
Lawsuits involving actual controllers damaging company interests through affiliated relationships are inherently highly challenging, especially in confirming the identity of the actual controller, revealing their concealed infringing acts, distinguishing the blurred boundary between normal commercial transactions and infringing acts, and determining the amount of infringement, which are quite difficult in litigation.
This case embodies the above common difficulties in a concentrated manner. The facts are complex and the infringing acts are concealed. Before the case (criminal offense) occurred, Lin had destroyed and concealed a large number of key evidences. Some of the remaining documents were suspected of data fraud. All senior executives involved in operation and management were under Lin’s command, and no one cooperated in revealing the truth of the infringement. Therefore, it was difficult for the shareholding company to fully prove the infringing nature of the transactions involved and the amount of After accepting the client’s entrustment, facing multiple difficulties, HongQiao ZhengHan immediately carried out special case demonstration. By disassembling and studying the business model of the transactions involved, it gradually restored that the transactions seriously lacked commercial rationality and even had no commercial substance at all. It creatively used the mastered annual audit reports to determine the preliminary amount of losses, and first successfully achieved the primary goal of filing the case and obtaining full property preservation. Subsequently, HongQiao ZhengHan, on behalf of the shareholding company, immediately applied to the court for judicial appraisal of the amount of losses. Despite the strong opposition of all defendants, who exerted extreme pressure on the court through letters and visits, complaints and other means, HongQiao ZhengHan successfully persuaded the court to initiate judicial appraisal through detailed demonstration. Faced with the defendants’ “request” to cross-examine 659 boxes of accounting vouchers one by one, HongQiao ZhengHan once again gave full play to the advantages of team-based case handling, deployed professional personnel from the entire firm, completed the cross-examination in a timely and efficient manner, and effectively responded to the other party’s attempt to obstruct the judicial appraisal. In response to the defendants’ strong defense that the transaction profits were a good intention but should not be judged by “success or failure”, and that they submitted a large number of evidences in an attempt to prove the rationality and necessity of the transactions, emphasizing that the transactions were collectively decided by the board of directors and the shareholders were informed from the beginning, we refuted them one by one and effectively cracked their defense logic. The first-instance court finally ruled that Lin and his affiliated parties should jointly and severally compensate 400 million yuan based on the appraisal opinion. Recently, after 19 months of trial, the Shanghai High People’s Court issued an effective judgment, upholding the compensation liability of Lin and his affiliated parties (beneficiaries).Host Team
