On April 18th, LegalOne, an internationally renowned rating agency for commercial transactions and dispute resolution programs, announced that the “Leshi.com Misrepresentation Liability Dispute Ordinary Representative Litigation Case” was awarded a LegalOne Merits (Exemplary) rating.
The case was represented by Mr. Zhao Qilong and Mr. Jiang Ning, senior partners of King&Capital Law Firm. The case is also the first case of ordinary representative litigation in China.
Introduction
Listed company Leshi.com was penalized by the China Securities Regulatory Commission (CSRC) for five acts of misrepresentation, including falsification of financial reports from 2007 to 2017, and the case was filed by more than 2,000 people from investment institutions and shareholders in an ordinary representative litigation, with the amount of the claims initially sued amounting to more than RMB 6 billion. There were 25 defendants, involving listed companies, actual controllers, directors, supervisors and other personnel, as well as a number of securities companies, accounting firms, law firms and other intermediaries. The vice president of the listed company appointed King&Capital lawyers Zhao Qilong, Jiang Ning and Shi Nannan to represent the company in the securities misrepresentation case and the administrative litigation with the China Securities Regulatory Commission (CSRC). The civil case was decided in the first instance and both parties appealed to the Beijing Higher People's Court against the judgment. A senior executive represented by the agent was sentenced to bear 0.5% of the losses arising from the misrepresentation during his tenure.
In the civil litigation of the first instance, the agent, in order to obtain evidence in favor of the client, obtained evidence of the penalty imposed by the Securities and Futures Commission (SFC) by way of filing an administrative reconsideration and an administrative litigation, and found evidence from it in favor of the client, and the court ultimately imposed a liability of 0.5% of the amount of the damages for the defendant's failure to perform its duty of diligence, which is comparable to the 5% of damages awarded against the directors and supervisors in the famous domestic case of false statement of securities of CombiMed Pharmaceuticals -20% liability, the percentage of damages awarded in this case is relatively low.
This case is the first ordinary representative litigation case in China since the promulgation of the Provisions on Several Issues Concerning Representative Litigation in Securities Disputes promulgated by the Supreme People's Court in July 2020, and it applies the newly revised Provisions on Several Cases Concerning the Trial of Civil Compensation Cases for the Infringement of False Statements in the Securities Market of the Supreme People's Court of 2022, which provides a model for the trial of securities misrepresentation in China in the future.
