Arbitration Case Concerning the Dispute of Overall Transfer of Assets between Chinese and Hong Kong Shareholders of A Joint Venture Auto Parts Production Company (2006-2011)
Basic facts:
Our client has acquired the overall assets of a Sino-Hong Kong joint venture auto parts production company (the “Sino-Hong Kong Company”) and issued a commitment letter promising that it will be responsible for the compensation responsibility that may be generated by the asset acquisition. So as to prevent our client from paying compensation, our lawyers and the lawyers of Chinese shareholders of the company under dispute have established a joint team of lawyers to jointly advice on this arbitration case.
The Sino-Hong Kong Company was jointly invested and established by a state-owned enterprise, a company consisting of management team and a Hong Kong-funded enterprise, specializing in the production of automotive transmission parts. In 2006, the Chinese controlling shareholder of the Sino-Hong Kong Company planned to restructure its assets and business of auto transmission parts. The Sino-Hong Kong Company is also a part of the restructure plan, which was to integrate its assets and the assets of other affiliated companies as a whole and then to transfer all the relevant assets to a newly established company. The Board of Directors of the Sino-Hong Kong Company has held five meetings as for the transfer of assets and has approved the transfer. The members of the Board of Directors unanimously agree to sell the assets as a whole and approved the asset appraisal report. The new company in this case was set up six months later than expected, thus the first asset appraisal report expired and then the second asset appraisal report was made as a renewal of the first report.
The focus of this case is whether the Board of Directors has legally approved the transfer of assets as a whole. Whether the expiration of the first asset appraisal report means that the Board of Directors shall make another resolution for the second asset appraisal report or not.
During the hearing of the case, the resolutions and meeting minutes of the five board meetings have been provided to the arbitral tribunal, and the parties under dispute have made their own interpretation of the contents of resolutions. Our lawyers have avoided the one-sided arguments of lawyers of the Hong Kong shareholder, but presented the contents of board meetings and their resolutions from the perspectives of the occurrence and evolvement of the entire event based on our work experience and daily practice. Our lawyers presented the far-fetched arguments and evidence of the inconsistent behaviors of the Hong Kong shareholder to the arbitrator. According to the provisions of Joint Venture law, the Board of Directors is the highest authority of a joint venture. Therefore, the transfer of assets shall be adopted by the board resolution and the additional approval of shareholders is not required. Moreover, the expiration of the asset appraisal report does not affect the validity of board; therefore, the second asset appraisal report does not need to be separately adopted by the board for it only updated the base date of appraisal, inventory and other relevant contents.
The Hong Kong shareholder also has provided the asset appraisal report of Sino-Hong Kong Company made by accountants appointed by them. This report was submitted after the time limit of proof specified by the arbitral tribunal. Most importantly, this report was lacking of the support of audit reports and other original data. The base date of appraisal was during the arbitration case, so we comprehensively argued from the several perspectives that the new appraisal report shall not be regarded as evidence. Further, we had professional appraisers to make professional analysis and assessment of the new appraisal report. They pointed out the common mistakes in the new appraisal report. In short, we have refuted the authenticity, relevance and probative force of the asset appraisal report from the perspective of arbitration rule, the contents of evidence and other aspects.
Before each hearing of court, the joint team of lawyers conducted simulation exercise of hearing of court in advance and prepared answers to the possible problems which may be raised by the arbitrators and the responses of arbitrators. During the simulating hearing, the statement of the lawyer to be made in the court were further simplified and made more accurate.
In short, through careful, attentive and thorough preparation of the joint team of lawyers, we have successfully persuaded the arbitrators to accept our views and the arbitrators finally made judgment favorable for us in 2011.
Lawyers’ remarks:
Each arbitration case has argument points and evidence that is favorable or unfavorable to our client. The key to win a case is to bring points that are favorable for us into full play and avoid the points that are unfavorable for our client. The lawyers of this case have made full preparation, comprehensive consideration of the points, led the direction of hearing, introduced the argumentation to a direction that benefits our client and finally ensured the winning of this case.
