Every reporter: Xu Shuai, Cheng Ya, every editor: Zhang Haini
Three years ago, Wuxi Jingliang Smart City Technology Co., Ltd. (hereinafter referred to as Jingliang Company) had a dispute with Liangxi District Urban Management Bureau (hereinafter referred to as Liangxi District Urban Management Bureau) over the operation of the parking lot business in Liangxi District, Wuxi City. Jingliang Company is a member of United Strong (002383. SZ) and Wuxi Liangxi Urban Investment and Development Group Co., Ltd. (hereinafter referred to as Liangxi Urban Investment) are a joint venture company, with 60% of the shares held by Hezhong Strong.
The original deadline for the operation of the parking lot was March 31, 2027, but the Liangxi District Urban Management Bureau announced in 2021 that it had withdrawn its entrustment to Jingliang Company. The parties disagree on whether the power of attorney should be withdrawn "in advance". This year, the dispute between Jingliang Company, a subsidiary of United Strong, and the Liangxi District Urban Management Bureau entered the litigation level. According to Tianyancha information, the case type of the lawsuit was an administrative case, and Jingliang Company was the plaintiff in the first instance.
Jingliang Company Image source: Photo by reporter Cheng Ya
Liangxi District Urban Management Bureau Image source: Photo by reporter Cheng Ya
The dispute surrounding the parking lot also involved the shareholders of Jingliang Company. In January this year, United Strong announced three lawsuits, in which Liangxi Urban Investment and United Strong [United Strong and its affiliated fund Ningbo Mopu Linjing Investment Partnership (Limited Partnership), as well as United Strong subsidiary] were each other's original defendants in the litigation cases. In one of the two cases in which United Strong was the plaintiff, it was found that Liangxi Chengtou's breach of contract triggered the repurchase clause, and the other case demanded the return of the official seal of Jingliang Company. In a separate case, Liangxi Chengtou sued for the dissolution of Jingliang Company and applied for property preservation to freeze the bank deposits of the joint venture company between the two parties.
At the end of August, the 2024 semi-annual report disclosed by United Strong showed that the contract dispute case involving the two parties was closed in the first instance, and the court rejected the litigation claims of both parties. The focus of the controversy was whether Liangxi Chengtou had violated the non-compete agreement. Jingliang Company emphasized that it had invested a lot of money before and after the operation of the parking lot and achieved good results, but Liangxi Urban Investment believed that the operating results of Jingliang Company were far from expectations.
Since September, the reporter of "Daily Economic News" has interviewed the joint lawyer of United Strong and Ningbo Mopu Linjing Investment Partnership (Limited Partnership) (hereinafter referred to as Mopu Linjing), the lawyer of Jingliang Company, Liangxi City Investment, Liangxi District Urban Management Bureau and other parties through WeChat exchanges, telephone interviews and on-site visits. The parties continue to disagree and reach a conclusion.
The two major shareholders of the joint venture company fell out
Although Jingliang Company did not add bright performance to the financial statements of United Strong, it is still very important for listed companies, and it is an important carrying platform for United Strong Smart Parking Business.
In July 2018, Hezhong Strong cooperated with Liangxi Urban Investment to jointly establish Jingliang Company (registered capital of 100 million yuan). Among them, United Strong directly holds 21% of the shares, the industrial fund controlled by United Strong holds 39% of the shares, and Liangxi Urban Investment holds 40% of the shares. Jingliang Company is mainly engaged in the construction of smart city platforms and related services.
Shareholders of Jingliang Company Image source: Screenshot of Tianyancha
This year, the smart parking business is also the capital market outlet, some listed companies with the help of intelligent manufacturing, parking resources, the Internet and other aspects of the advantages, vigorously develop the intelligent parking industry. At present, the companies that have been listed and operate the parking business include Jieshun Technology (002609. SZ), Wuyang Controls (300420. SZ) and so on.
Judging from the financial reports of listed companies in the same industry, the parking business has increased its revenue and net profit. For example, from 2018 to 2023, Jieshun Technology's operating income increased from 904 million yuan to 1.645 billion yuan, and the net profit after deducting non-profits increased from 74.8895 million yuan to 81.6245 million yuan.
According to the 2021 annual report of United Strong, in 2020 and 2021, Jingliang Company's net profit was a loss, with a revenue of 22.054 million yuan in 2021, and even a negative revenue in 2020.
Jingliang Company's operation in 2020 and 2021 Image source: Screenshot of Hezhong Strong's 2021 annual report
However, Jingliang Company has not yet come out of the loss-making situation, but the two major shareholders of the joint venture company have already fallen out, so much so that they have gone to court.
At the end of January this year, United Strong disclosed a number of cases involving its subsidiaries, some of which were filed by United Strong and Mo Pu Linjing, and some of which were filed by Liangxi Urban Investment.
United Strong and Mo Pu Linjing sued Liangxi Urban Investment, arguing that Liangxi Urban Investment had breached the contract, triggering the repurchase clause under the Investment Framework Agreement, and suing Liangxi Urban Investment to pay 36 million yuan for the equity repurchase to United Strong and Mo Pu Linjing and compensate for the loss of interest on overdue payments. United Strong filed a shareholder representative lawsuit, claiming that Zhou, a director and executive of Jingliang Company, should compensate Jingliang Company for economic losses (a total of about 4.8933 million yuan).
United Strong also sued Liangxi Urban Investment, demanding the return of Jingliang's official seal and license.
Liangxi Chengtou sued Jingliang Company, arguing that Jingliang's corporate governance was deadlocked and its business was stagnant. Liangxi Chengtou filed a lawsuit with the court, requesting the dissolution of Jingliang Company. At the same time, Liangxi Chengtou applied for property preservation, requesting that Jingliang Company's bank deposits of 28 million yuan be frozen or its corresponding property sealed and seized.
In early September, the reporter of "Daily Economic News" learned from the lawyer representing Mo Pu Linjing in the above case that Mo Pu Linjing's request for the equity repurchase of Liangxi Urban Investment was lost in the first instance, and Mo Pu Linjing had appealed.
According to Tianyancha, the case of Liangxi Chengtou suing Jingliang Company was still in the first instance on July 8. As for the property preservation applied by Liangxi Urban Investment, it has entered the enforcement stage.
On October 10, the reporter of "Daily Economic News" contacted the relevant personnel in charge of information disclosure of United Strong, and the other party said that the relevant cases had been disclosed through the announcement. As for the details of the case, in accordance with the relevant regulations of the company, the company's department in charge of media docking will be interviewed.
Subsequently, the reporter contacted the staff of the relevant departments of the United Strong docking media and sent them an interview outline. The other party said: "I will urge the relevant personnel of the subordinate company to contact you (the reporter) as soon as possible." However, as of press time, the reporter has not received a reply from United Strong.
Although the verdict of the above case has not yet been announced, the lawyer representing Mo Pu Linjing revealed to reporters another case related to the above case, that is, United Strong sued Zhou and Wuxi Liangxi City Operation Service Group Co., Ltd. (hereinafter referred to as Wuxi Chengyun) for harming the company's interests. From March 17, 2021 to July 27, 2023, Wuxi Chengyun was a holding subsidiary of Liangxi Chengtou, and Zhou was the legal representative of Wuxi Chengyun. Zhou is also the director and executive of the above-mentioned Jingliang Company. The second-instance trial of the case has been concluded, and the court ruled against Hezhongsistrong.
The operation entrustment agreement has not yet expired, and the two parties have already disagreed
At the time of the establishment of Jingliang Company, Liangxi Urban Investment and United Strong signed the Investment Framework Agreement, which stipulated in the section on the rights and obligations of both parties that the two parties would be the sole partners of each other in the area under the jurisdiction of Wuxi City. Within the scope of the same kind of business operated by the target company (Jingliang Company), the parties and their directors and senior management personnel cannot operate the same business as the target company (Jingliang Company) on their own or for a third party or in cooperation with a third party. In the event of a fundamental breach of contract or an act that seriously damages the interests of the other party or the target company, one party has the right to require the other party to acquire its own equity at 1.2 times. "As a shareholder of Jingliang Company, Liangxi Urban Investment violated Article 8.9 of the Investment Framework Agreement." Mo Pulinjing's lawyer said.
In 2021, Wuxi Chengyun (formerly known as "Wuxi Liangxi Internet of Things Technology Co., Ltd."), a subsidiary held by Liangxi Urban Investment from March 17, 2021 to July 27, 2023, changed its business scope on April 13, 2021, adding the "parking lot service" project, and the legal representative became Zhou. Zhou was appointed by Liangxi Chengtou to Wuxi Chengyun as a director and deputy general manager.
The first-instance judgment of the Wuxi Binhu District People's Court held that Zhou's conduct violated the non-compete obligations of directors and executives. However, according to the explanation of the situation provided by Zhou, bank transaction details and other evidence, he did not receive income during his tenure in Wuxi Chengyun, and the court held that there was no corresponding basis for Zhou's income in Wuxi Chengyun to be attributed to Jingliang Company, and it was not supported.
The court held that the plaintiff's evidence could not prove that there was a causal relationship between the decrease in Jingliang's operating income and Zhou's role as the legal representative of Wuxi Chengyun.
Regarding the first-instance verdict, Mo Pulinjing's lawyer said that he did not accept it and has appealed.
However, the second-instance judgment of the court basically upheld the facts found in the first instance, holding that the directors and senior managers of the company violated the provisions of non-competition by operating the same kind of business as the company for others or for others, and that the infringement should have been done by the directors and senior managers on their own initiative, and that Zhou's above-mentioned acts were appointed by his superiors and had no subjective intention.
The second-instance verdict of the case of United Strong v. Zhou Image source: obtained by reporters
The reporter of "Daily Economic News" noticed that in the lawsuit between United Strong and Liangxi Urban Investment, the court held that Zhou's above-mentioned behavior (being appointed as the legal representative of Wuxi Urban Transport) was not enough to constitute a fundamental breach of contract. If this constitutes a fundamental breach of contract, triggering the repurchase clause will lead to the termination of the cooperation, and the liability consequences will obviously be too heavy.
At two o'clock in the afternoon of September 11, the reporter met Zhou in the 402 office of Liangxi Chengtou on the 4th floor of Huizhi Building. Zhou said that it is necessary to communicate through the Propaganda Department of the Liangxi District Party Committee, which is not a private matter, but a matter of public officials, and it must be carried out public-to-business, and this matter is already going through the judicial process.
A relevant person from Liangxi Urban Investment told reporters that because the operating conditions of Jingliang Company were far from meeting expectations, major differences and contradictions arose in the cooperation between the two sides. As one of the shareholders of Jingliang Company, Liangxi Urban Investment requested to withdraw from the cooperation based on the current situation, and is currently in the process of litigation. In view of the confidentiality of the relevant evidence and the neutrality and impartiality of the court during the trial, it is inconvenient to be interviewed during this period.
Liangxi Chengtou Image source: Photo by reporter Cheng Ya
The reporter noted that in the case involving Zhou and Liangxi Urban Investment, the court mentioned in the judgment that the parking lot business of Jingliang Company was affected because the Liangxi District Urban Management Bureau terminated the entrustment of Jingliang Company for the construction and operation of parking resources in its jurisdiction, resulting in the loss of this part of the parking business of Jingliang Company.
According to a material provided by Jingliang Company, Jingliang Company has participated in a number of key projects in the construction of "Smart Liangxi" since its establishment. The Liangxi District Urban Management Bureau and Jingliang Company signed the "Liangxi District Smart Parking Project Construction and Operation Entrustment Agreement" (hereinafter referred to as the "Operation Entrustment Agreement"), agreeing that the Liangxi District Urban Management Bureau will entrust the intelligent construction and operation of public parking spaces in Liangxi District to Jingliang Company for a period of 8 years from April 1, 2019 to March 31, 2027. According to the "Operation Entrustment Agreement", the "Smart Parking" project is a key construction project of "Smart Liangxi" in 2018. The entrusted operation involves 5,555 paid parking spaces, 791 directional taxi spaces, and 524 free or uncharged parking spaces.
Part of the entrustment agreement Image source: obtained by the reporter
On March 9, 2021, the Liangxi District Urban Management Bureau sent a letter to Liangxi Urban Investment and Jingliang Company, which was scheduled to terminate the "Liangxi District Smart Parking Project Construction and Operation Entrustment Agreement" on March 31, 2021, and to recover all parking resources entrusted by the Liangxi District Urban Management Bureau to the construction, operation and management of Jingliang Company. At the same time, the Liangxi District Urban Management Bureau entrusted Liangxi Urban Investment to do a good job in the handover of Jingliang Company's parking resources and maintain the smooth operation during the handover period.
The termination of the parking lot operation entrustment agreement is disputed
Since the entrustment time agreed by the two parties is 8 years, why does the Liangxi District Urban Management Bureau withdraw the entrustment of Jingliang Company's parking lot operation "in advance"? The reporter of "Daily Economic News" learned from the lawyer representing Jingliang Company that the case litigation between Jingliang Company and Liangxi District Urban Management Bureau is under trial. According to Tianyancha information, the case type of the lawsuit was an administrative case, and Jingliang Company was the plaintiff in the first instance.
In mid-September, the reporter of "Daily Economic News" interviewed relevant people from the Liangxi District Urban Management Bureau. The other party believes that during the cooperation period, Jingliang Company failed to hand over the full amount of the district finance in accordance with the regulations, and it was far lower than the agreed minimum figure. The second is the poor effect of smart parking construction, the user experience of the smart parking business carried out by Jingliang Company is poor, and there are many complaints from the public. Finally, there is the illegal migration of data. The company stored part of the parking data in an unspecified server without obtaining the permission of the competent authority, which has the potential risk of public information data leakage. Finally, after considering various factors, the Liangxi District Urban Management Bureau terminated its cooperation with it on March 31, 2021.
The legal counsel of the Liangxi District Urban Management Bureau said that from the perspective of the contract, the entrusting party has the right to terminate at will, but the urban management bureau does not terminate the contract based on the right to terminate at will, but on the basis of the above three major breaches, which accurately step on the "red line".
The relevant person in charge of the Liangxi District Urban Management Bureau said that before the termination of the cooperation with Jingliang Company, there had been many communications on the problems of the other party, and the notice of termination of the cooperation was not sudden.
The lawyer representing Jingliang Company expressed objections and rebuttals, mentioning that the payment terms were not fulfilled (the payment amount required a third-party audit report, and the other party did not provide an effective audit report in a timely manner), and the lawyer Mo Pulinjing said that Jingliang Company had invested a certain amount of money.
However, the Liangxi District Urban Management Bureau said that it had provided the audit report to the other party at that time, but the other party did not admit it.
The lawyer representing Jingliang Company argued that the Liangxi District Urban Management Bureau's act of entrusting Jingliang Company to carry out the construction and operation was a franchise agreement under administrative law. The rights and obligations of both parties are stipulated in the agreement, and Jingliang Company has not violated any of the obligations of Party B. As for the problems related to the registration and use of small programs, which is the inevitable occurrence of the process of converting manual fees to electronic fees during the construction period, and it is also the inevitable accompaniment of the "smart parking" project. Even if the administrative agreement is terminated, it should perform the obligation of compensation or compensation in accordance with the law, but Jingliang Company has not received any compensation or compensation.
There is also a "hidden danger of data leakage" that is highly controversial between the two sides.
In the case of Hezhong Strong v. Zhou, the facts found by the court mentioned that on March 9, 2021, the Liangxi District Urban Management Bureau sent a letter to Liangxi Urban Investment and Jingliang Company to terminate the parking lot agreement, and the cooperation was scheduled to be terminated on March 31.
The above-mentioned "data leakage vulnerability" occurred on the evening of March 30, 2021, that is, the period between the time when the Liangxi District Urban Management Bureau sent the letter and the time when the commission was terminated.
Mo Pulinjing's lawyer said that on the evening of March 30, 2021, because the two parties did not reach an agreement on the "termination of the contract", Jingliang Company was still carrying out the operation and maintenance of the system platform, and the external technical team was taken to the urban management brigade by the other party during a routine inspection, on the grounds that the company's employees had stolen data and all mobile phones and computers were confiscated.
The response of the Liangxi District Urban Management Bureau was that the other party mentioned above illegally migrated data.
"Where does the so-called data theft come from? The data I maintain is on my server, and I'm still running to the field to steal it? Zhao, the legal representative of Jingliang Company, said. As for why he chose to carry out data maintenance at night, Zhao said that it was precisely in order to take into account the uninterrupted charging system during the day and not affect the charging work during the day, so he chose to test and debug the system at night.
The legal counsel of the Liangxi District Urban Management Bureau of Wuxi City said that the case is still under trial, and in order not to hinder judicial fairness, the judgment shall prevail.
The two parties still have their own opinions on the above-mentioned contract termination matters and the process of "data breach risk".
National Business Daily