Basic facts:
The non-performing assets received by Guangdong Yuecai Investment Holdings Limited (Yuecai) from Guangdong Development Bank include the credit of certain branch of Guangdong Development Bank in Zhengzhou against nine companies in Henan Province, with a total principal amount of RMB 180 million. Such credit is pledged by the self-own fund of Hantang Securities Co., Ltd. (Hantang). As Hantang has gone bankrupt and Yuecai has declared priority claims to the administrator of Hantang for several time but failed to obtain confirmation, our law firm is hereby entrusted to file claim of debt against the administrator. When our law firm accepted the entrustment, Hantang was going to carry out the third asset allocation, thus it is very urgent.
The focus of this project is whether Yuecai enjoys the priority claims of Hantang, namely whether the pledge is valid. After our law firm has accepted the entrustment, Yuecai I still insisted that our law firm shall declare priority claims against the administrator in the form of claiming priority. Our law firm has submitted priority declaration, carried out repeated communications with other law firms and administrator and finally believed that because the pledge account provided by Hantang is the customer transactions settlement account reported to the SFC, the pledge behavior has violated the prohibitions in Securities Act. Therefore, the pledge provided by Hantang is invalid and the priority claim declared at the administrator shall not be confirmed.
According to the above conclusions, our law firm has communicated with Yuecai, made interpretation on the actual situation of project and relevant provisions in the Securities Law, proposed to declare ordinary credit against the administrator and has made demonstration on the feasibility of ordinary credit. Finally, Yuecai accepted the advices of our law firm; then, we have withdrawn the declaration of priority claim and changed it to be the declaration of ordinary credit.
The administrator of Hantang has finally accepted the view of our law firm that the pledge is invalid, but original Guangdong Development Bank has no fault, thus the ordinary credit of Yuecai has been confirmed according to relevant judicial interpretation of the Guarantee Law. Finally, when Hantang carried out the third asset allocation, Yuecai has made repayment of nearly RMB 100 million of debt according to the proportions of the first, second and third asset allocations.
Lawyers’ remarks:
It is the responsibility of lawyers to make detailed analysis and determine the correct qualitative of case materials, guide the client to make correct selection and safeguard the legitimate interests of the client at the maximum extent. In this project, our law firm has presented right advices about whether the priority claim shall be declared to the client according to the specific situation, safeguarding the legitimate interests of the client at the maximum extent.