Zhenzhou Helps Disposing HK Company Shares Worth 100 Mil, Assisting Business on Healthy Development

¡¾CASE¡¿

      Company A has outstanding debts against its HK public shareholder Company B, the debt was jointly guaranteed by Zhoushan Company C. Company B provided counter-guarantee to C with its share of A at 20%. In August 2019, Company B was petitioned for compulsory liquidation for its debt problems. After a hearing in HK High Court, there was considerable risk of the company going into compulsory liquidation process.

      After assuming guarantee responsibility, Company C sought the right of recourse against Company B at Zhoushan Intermediate People¡¯s Court. Parties reached a settlement agreement under the mediation by the court, resolving the matter by disposition of the pledged shares.

      Subsequently, company C sought enforcement of the settlement at the court. During the course of enforcement, in one hand, Company B was under the compulsory liquidation; in the other hand, the epidemic outbreak forced the authorities on both HK and the mainland sides to take tough regulations against border control and travelling. As a result, the share disposition process was heavily affected, even the paper transfer was facing much difficulty.

      Board member of company B had to submit a notified engagement letter of a HK law firm to Zhoushan court to verify standing. Zhenzhou Law Firm acted on behalf of counsel of Company C. To ensure a smooth disposition, Zhenzhou took advantage of its resources as member of the Changjiang Attorney League, contacted counterpart member in HK to help with the engagement letter. Officers of the court advised parties to nominate an assigned person to receive all legal documents. With efforts from all partied involved, Company D in HK bought the auctioned shares on April 7^th, 2020.

      After the auction, Zhenzhou also assisted the transfer process by engaging the HK firm to issue a board meeting memo instead of an on-site interview with the president. The whole process was carried out in accordance with the legal requirement, and in a surprising pace, such achieved a win-win result for all parties.

¡¾Legal Analysis¡¿

       Representatives of parties involved HK, are required to submit a letter of engagement by a HK law firm to courts in mainland, offering to prove legality of the company¡¯s founding and existence, and the legality of the engagement. Courts could only proceed with the case after verifying the authenticity and the legality of the engagement process.

¡¾Significance¡¿

      1. facing the crisis of compulsory liquidation of company B, partied were reluctant to choose between disposition of shares privately and file the grievance through the legal system, and finally decided to file in mainland courts and settle the matter through mediation, in consideration of the liquidation process of HK and territorial difficulties. The matter was quickly settled and revolved with the efforts of officers of the court, and all partied involed.

      2. in dealing with HK related cases, because the difference on the legal system and environment, Zhenzhou made use of its unique resources as a member the a prestigious league, arranged a HK member to help with the process. Thus, managed to maintain the clients interests in maximum.

      3. facing the difficulties posed by the epidemic, the court and parties took advantage of modern technologies with online stream feedings, appointing contact in mainland for HK party, and post deliveries, to facilitate the procedure while preserving integrity of procedural due process, achieving satisfactory results for all parties involved. The initiatives and breakthroughs made in this case could offer reference to all future processes.