Q: What is the related case to Shareholder Derivative Actions in China?
A:
In 2006, the Shin Kong Group, one of the Taiwanese family-owned conglomerates, established a joint venture with Hualian Investment, a large Chinese State Owned Enterprise (SOE), which has an affiliate listed on the Shanghai stock exchange. In late 2008, relations between the parties had deteriorated to such an extent that Hualian filed a shareholder derivative suit in Beijing against some of the senior managers of the joint venture (appointed by Shin Kong) and two affiliates of Shin Kong, while separately initiating arbitration in Hong Kong against Shin Kong under the joint venture agreement.
Q: What can we learn from the case?
A:
This case has several takeaways for counsel advising companies doing business in China:
• litigation in China in a related dispute can be an option for those with offshore (China) arbitration clauses because of the limited availability of interim relief in China;
• shareholder derivative actions may be used to protect private as well as public companies; and
• foreign (including Hong Kong, Macau, and Taiwanese) personnel caught in a dispute may, under Chinese law, find themselves prevented from leaving China.