Breaking through the preposition of administrative penalties, the Wuhan Intermediate People's Court officially accepted the first case of misrepresentation of Zhongzhu Medical Securities

#普法行动 #

On November 1, 2021, the first case of misrepresentation of Zhongzhu Medical Securities filed by Zhang Wei of Shanghai Xinyi Law Firm with the Intermediate People's Court of Wuhan City, Hubei Province was officially filed by the court.

On August 16, 2021, Mr. Wang, represented by Zhang Wei of Shanghai Xinyi Law Firm, filed litigation materials with the Intermediate People's Court of Wuhan City, Hubei Province, in the case of Securities Misrepresentation of Zhongzhu Medical Co., Ltd. (stock abbreviation: Zhongzhu Medical, ST Zhongzhu, stock code: 600568). On August 24, 2021, the Intermediate People's Court of Wuhan City, Hubei Province, after communicating with lawyer Zhang Wei, first filed the case as a pre-litigation mediation case.

It is reported that this is the first batch of Zhongzhu Medical investor claim cases that have officially entered the litigation procedure. As the plaintiff's representative, Zhang Wei, a lawyer at Shanghai Xinyi Law Firm, said that the investor bought Zhongzhu Medical shares (ST Zhongzhu, 600568) between September 10, 2016 (inclusive) and April 26, 2019 (inclusive), and sold or held them after April 27, 2019 to generate losses. The investor's claim amount is about 224,000 yuan.

Lawyer Zhang Wei said that the investor filed a claim lawsuit against Zhongzhu Medical because it had irregularities in failing to disclose the relevant related party transactions in a timely manner. After investigation, Zhongzhu Medical was suspected of illegal information disclosure: first, Zhongzhu Medical did not disclose the relevant related party transactions as required; second, Zhongzhu Medical did not disclose in a timely manner to provide guarantees for related parties. The above two types of violations list a total of eleven facts, which are proved by evidence such as relevant enterprise industrial and commercial registration materials, bank information, relevant agreements, announcements, interrogation records and situation notes.

On November 11, 2020, the Hubei Regulatory Bureau of the China Securities Regulatory Commission issued an administrative penalty and a prior notice of market ban on Zhongzhu Medical, intending to impose administrative penalties on the company, the then chairman Xu Delai, the then director Liu Danning, the then secretary of the board of directors Chen Xiaozheng, the then financial director Liu Zhijian and other parties in accordance with the law, and take measures to ban the securities market from the then chairman Xu Delai and the then director Liu Danning.

It is particularly noteworthy that Zhongzhu Medical was not ultimately subject to administrative penalties for the above-mentioned related party transaction violations. On 12 August 2021, Zhongzhu Medical received the Notice of Case Closure (Ejie Case Zi [2021] No. 5) issued by the Hubei Supervision Bureau of the China Securities Regulatory Commission on 26 July 2021. The content of the notice of closure is as follows: "In 2019, our bureau issued a Notice of Investigation (Investigation Notice No.: Ezheng Investigation Zi [2019] No. 046) to your company to file a case investigation into your company's suspected violations of laws and regulations on information disclosure. In view of the fact that the relevant acts have been rectified within the time limit, in accordance with the provisions of the second paragraph of Article 27 of the Administrative Punishment Law of the People's Republic of China amended in 2009, our bureau decided not to impose administrative penalties on your company, and the case was closed. ”

On November 11, 2021, the Disciplinary Decision No. 121 [2021] of the Shanghai Stock Exchange pointed out that the company was found to have the following violations: First, the related party transactions failed to perform the decision-making procedures and information disclosure obligations in a timely manner. The second is the non-operating capital occupation of controlling shareholders and their related parties. First, the company repays debts on behalf of related parties, constituting the non-operating capital occupation of the controlling shareholder and its related parties. Second, the assumption of guarantee liability for the controlling shareholder's subsidiary constitutes the appropriation of non-operating funds by the controlling shareholder and its related parties, and the information disclosure of the overdue matters of the guarantee is inaccurate. Therefore, the following disciplinary decisions were made: Zhongzhu Medical Holdings Co., Ltd., the company's controlling shareholder, Zhuhai Zhongzhu Group Co., Ltd., the company's actual controller, then chairman and general manager Xu Delai, and the company's then financial director Liu Zhijian were publicly reprimanded; Ye Jige, then chairman of the company, and Jiang Chunqian, then deputy general manager and secretary of the board of directors, were notified and criticized.

For a long time, the administrative pre-position of civil compensation for securities misrepresentation has been one of the focal points of attention and controversy among shareholders, experts and scholars, as well as the media. Although the People's Court implemented a case filing and registration system on May 1, 2015, and the "Several Specific Issues of the Supreme People's Court on the Current Commercial Trial Work" issued on December 24, 2015, on the trial of securities investment financial dispute cases, it also directly indicates that according to the judicial interpretation on case filing and registration, civil compensation cases arising from false statements, insider trading and market manipulation are no longer regarded as preconditions when filing and accepting the case, and the administrative punishment of the regulatory authorities and the effective criminal judgment are no longer regarded as preconditions. However, in judicial practice, many courts still refuse to file cases on the grounds of this precondition.

Although the CSRC did not impose an administrative penalty in this case, the listed company in this case has announced that it believes that there are illegal facts and has been determined by the CSRC. This case has made an exploration of breaking through the administrative premise in judicial practice. In practice, some courts have quietly started the "pre-trial without penalty" model, and are gradually relaxing the conditions for accepting investor claims and lawsuits, such as the Beijing Culture case, the Haohua Energy case, and the *ST cross-border case.