Recently, the Beijing Municipal Higher People's Court rendered a judgment of the second instance on a contractual dispute arising from an equity investment between a company in Beijing (hereinafter referred to as the “Client”), which was represented by King&Capital, and a mining company and an energy company, ordering the termination of the capital increase agreement signed by the two parties, and that the mining company and the energy company jointly and severally return to the Client the investment funds with a total amount of principal and interest of more than RMB500 million. The judgment ordered the termination of the capital increase agreement signed by the two parties. The case was represented by Mr. Chen Dongli and Mr. Li Qi from the Civil and Commercial Litigation Department of King&Capital.
The case is summarized as follows
The client and Energy Company, the sole shareholder of the mining company, signed a capital increase agreement, under which the client invested RMB 300 million to subscribe for the new shares of the mining company. After the client transferred 300 million Yuan into the account of the mining company, the mining company never handled the procedures of the agreed capital increase. At the same time, along with the original controller of the mining company involved in criminal proceedings, state-owned enterprises into the shares and many rounds of shareholder turnover, the above capital increase and expansion of shareholding arrangements have been put on hold for a long time. In recent years, the industry market fluctuated drastically, coupled with the energy company's heavy debts, the mining company also fell into a long-term operating difficulties. With the passage of time, it was difficult and undesirable to proceed with the implementation of the share capital increase as originally planned.
In order to safeguard its legitimate rights and interests, the client appointed King&Capital to intervene to resolve the dispute. The King&Capital team assisted the client in determining a litigation plan to terminate the capital increase agreement and request the mining company and energy company to jointly and severally return the investment money and pay the interest loss after a comprehensive argument. In the course of the litigation, the mining company intended to interpret the investment as a debt of the energy company, and there were huge disputes between the parties as to whether the mining company had formed new registered capital, whether the client had acquired equity, whether there was equity holding between the client and the energy company, and whether the relevant agreement could bind the mining company as a non-signatory to the contract, etc., and there was a heated exchange of views and evidence in the court. Another major dispute in this case is that the investment of the five investors in the same period was recognized as the debt of the energy company by other provincial high court judgment, the mining company also strongly claimed that this case and the other five cases for the same case, should be “the same judgment”. Once this claim is accepted by the court, based on the energy company is nearly insolvent, the client's claim will be trapped in a greater risk of insolvency.
King&Capital lawyers comprehensively sorted out the investment documents between the two parties for more than ten years, digging deep into the details of the evidence, and submitted rebuttal evidence on the differences between the previous five cases and the present case and launched a detailed, item-by-item rebuttal of the mining company's reasons for reply. The two trials lasted nearly two years, the court of first and second instance finally adopted King&Capital's agency opinion, and found that the first five cases and the facts of this case are different, the energy company as the sole shareholder of the agreement signed by the capital increase can be binding on the mining company, the mining company is negligent in the performance of the contractual obligations of the customer did not obtain the equity constitutes a fundamental breach of contract, the customer has the right to terminate the contract and the mining company required to return the investment money and compensation for loss, and the energy company as the mining company at the time of the transaction occurred, and the mining company as the transaction occurred. As the sole shareholder of the mining company at the time of the transaction, the company should be jointly and severally liable for the debts of the mining company.
Through the work of the King&Capital team, the case was fully won. Now the judgment of this case has come into effect, the client is satisfied with the result, and entrusted King&Capital to continue to represent the case execution program.
