A total of 515 investors have filed lawsuits against Foshan Electrical Lighting (FSL). Guangzhou Municipal Court will begin court hearings on October 22, 2013. The company will be represented by lawyers Wang Zhibin and Wu Lijun in court.
Guangzhou Municipal Intermediate People’s Court judge has revealed that the court accepted the case of over 900 accumulated lawsuits totaling RMB $100 million (US$16,343).
Lawsuits Just the Tip of the Iceberg for FSL
On March 6th this year, FSL received a written administrative penalty from China Securities Regulatory Commission's Guangdong Bureau, according to a company announcement. The penalty noted FSL had on numerous occasions violated listed company information disclosure regulations, and was involved in dishonest disclosure of security guarantees, and other trade, investment, and acquisitions related to the company's daily operations during 2010 to 2011.
As soon as the announcement was out, FSL stock prices started to drop. Encroachment on investor’s rights lead to stockholders demanding compensation. Stockholders from around the world began filing lawsuits in April 2013.
Last month FSL released a statement announcing that Guangzhou Municipal Intermediate People’s Court has already accepted “misrepresentation” civil cases filed by 515 people against the company. The 515 cases have a claim totaling RMB$73 million.
In actuality, these numbers are only from the cases being handled by lawyers Wang and Wu. Due to the sheer volume of people who filed lawsuits, the civil cases were not presented by the court to FSL all at once but in batches. The number of lawsuits announced by the company does not even come close to the actual number filed. The Intermediate court judge Zeng Heqi revealed the actual number of lawsuits has already surpassed 900, Wang told a reporter from Touzi Kuaibao. It is safe to say that the amount in claims is well over a billion RMB.
Prosecution Focuses on Cause and Effect plus System Risks
Investors have been looking forward to the start of proceedings and interaction since this March when FSL was first penalized. The first set of lawsuits were filed in April, but it was not until this month that the court will finally be in session. Court proceedings for similar cases are neither too slow nor too fast, said Wang.
The court asked lawyers to come to the court one or two days early to exchange evidence, said Wang. Concerning the content of the court hearing, Wang estimates that the people who had originally filed lawsuits against the company are opening up prosecution against outcomes resulting from false statements and investment loss, as well as system risks. The dispute is centered mainly on these prosecutions.
There are many questions surrounding the court hearing, such as whether or not all 500 cases will be handled at once, if the court will require multiple days for proceedings, or if lines of investors will come pouring into the court house to initiate court hearings. Wang estimates that the cases will all be handled in one day. Although, there is a large number of individual lawsuits, as long as the lawyers representing each investor can conduct discussion, there will not be confrontation between the over 500 investors against the company. In addition, the court only prosecutes and decides on fundamental issues in these types of cases. Cementing each investor’s compensation qualification and total losses required reliance on a large quantity of work after the court hearing is done.
FSL Sets Up a 10 Lawyer Team to Combat Lawsuits
A reporter from Touzi Kuaibao contacted the secretary of the board for FSL by phone to inquire over the company’s reaction to the multitude of lawsuits filed against them. The company responded that lawyers have already been commissioned.
When asked about the media report that FSL had hired a team of 10 lawyers in response to investor lawsuits, the board’s secretary offered no comment. He did however say that the company did not intentionally create an “A Team” but is seriously hiring professional lawyers to handle the case. Due to the volume of lawsuits, it is only natural that the company would need several lawyers.
Looking at similar cases from the past, disputes between listed companies and investors are often settled quickly. Whether or not FSL during the hearing will be able to show willingness for quick resolve or stubbornly refuse to settle is still up in the air. The company’s board secretary said that it will all depend on the proceedings during the trial and that the company cannot reveal their intentions at this time. He stressed that the company will act aggressively and that the company will do all that it can to cope with the penalty.
Lawsuits to be Resolved in Two Years
A well known defense lawyer said that according to the judicial practice of this case, the lawsuit has an effectiveness of two years. The court will often prepare two judicial court sessions where both parties often express interest in mediating afterwards. However due to the number of people sued, and uncertain amount of total compensation, the timing for meditation remains immature.
Lawsuits of this nature will usually take longer than two years to reach a settlement. Therefore investors who meet compensation requirements, but have not yet filed lawsuits should not wait because they might miss out on the lawsuit’s two year effective period, explained the defense lawyer