Controversy Over Stock Ownership
CASE
Plaintiff: Noble China Corporation Ltd. (a Canadian public company)
Defendant: Jinan Beer Co. Ltd.
Defendant: Noble China Inc. (a Hong Kong-registered company)
Defendant: China Coastal Estate Exploitation Co. Ltd. (a Hong Kong-registered company)
BRIEF
Controversy over ownership of stock in a Chinese and foreign equity joint venture
Facts
On January 15, 1994, Jinan Beer Co. Ltd. (hereinafter referred to as Jinan Beer Group) and Noble China Co. Ltd. (hereinafter referred to as Canadian Noble) reached an agreement on a Chinese and foreign equity joint venture Jinan Noble Beer Co. Ltd. Mr. Li Jushun, the deputy of Canadian Noble, signed his name and "NOBLE CHINA INC." on the agreement.
On January 30, 1994, Jinan Beer Group and Canadian Noble reached a contract on Jinan Noble Beer Co. Ltd. It is agreed that: Jinan Noble Beer Co. Ltd. (hereinafter referred to as Joint Venture) invests the total sum of $29,980,000, including the registered capital of $24,354,000, among which the Sino-party invests $9,741,600 accounting for 40 percent of the total capital while the foreign party invests $14,612,400 accounting for 60 percent of the total capital. Any party who want to transfer its all or partial investment to the third party must ask for the agreement of the other side and must acquire the approved from the former department of examination and approval. The signature of the foreign party on this contract is "Noble China Group Ltd. For and on behalf of NOBLE CHINA INC. Li Jixiang Authorized Signature(s)".
On April 12, 1994, Jinan Committee of Foreign Economy and Trade (hereinafter referred to as Jinan FETC) approved the contract and articles of the above Joint Venture with the file of Ji-Jing-Mao-Tou-1994-90 and issued a certificate of FET-Lu-Fu-Ji-Zi-1994-0646 to Joint Venture, on which the foreign party of Joint Venture is "Hong Kong Noble China Investment Group Ltd.". State Administration of Industry and Commerce issued business license to Joint Venture the next day.
On April 10, 1994, Noble China Inc. (hereinafter referred to as Hong Kong Noble) entrusted Mr. Li Juquan to pay the investment of ￥20,000,000. It was recorded on the receipt issued by Jinan Beer Group that the name of payment is "project investment" and the payment party was "Noble China Group Ltd." On July 21, 1994, Hong Kong Noble entrusted Noble Inc. (Shenzhen) (hereinafter referred to as Shenzhen Noble) to sign the relevant agreement on equipment investment and to issue the L/C contract on its behalf. Then, Shenzhen Noble signed the agreement on equipment investment with Joint Venture and paid 5,580,000 Marks stipulated on the L/C. The payment party recorded on the receipt issued by Joint Venture was "Noble China Group". On October 14, 1994, Shenzhen Noble was entrusted by Hong Kong Noble to telegraphically transfer ￥3,000,000 to Jinan Beer Group in the name of prepaid equipment fund. On October 18, 1995, Shenzhen Noble, still entrusted by Hong Kong Noble, transferred ￥8, 000,000 to Joint Venture. Jinan Beer Group admits that it has received the inverstment of ￥31,000,000 in total.
On May 6, 1997, Hong Kong Noble wrote to Joint Venture and alleged that the name of the foreign party of Joint Venture change from Hong Kong Noble into China Coastal Estate Exploitation Co. Ltd. (hereinafter referred to as Hong Kong Coastal Co.). On May 8, 1997, Jinan Beer Group, Hong Kong Noble and Hong Kong Coastal Co. signed an agreement on transferring stock in Jinan, Shangdong. The three parties and the board of Joint Venture agreed in the agreement that Hong Kong Noble transferred all of its stock in Joint Venture to Hong Kong Coastal Co. On the same day, Jinan Beer Group and Hong Kong Coastal Corporation signed an agreement on amending the original contract, articles and accessorial documents for Joint Venture, changing the name of foreign party into "Noble China Inc." wholly and "Hong Kong Noble" recorded in the general principles and Article 1 of former contract and in the general principles and Article 3 of the articles into "Hong Kong Coastal Co." On June 11, 1997, Jinan FETC approved the foreign party‘s stock transference in Joint Venture with the file of Ji-Wai-Jing-Mao-Tou-Zi-1997-79. In June of 1997, Joint Venture took its new business license on which the foreign party had been changed as Hong Kong Coastal Co.
After being the stockholder of Joint Venture, Hong Kong Coastal Co. invested $11,000,187.83 to Joint Venture. On March 24, 1998, Jinan No. 2 Accountant Office issued the certificate of capital verification whose number was 1998-Lu-Ji-Er-Kuai-Yan-Zi-165-8, in which it was affirmed that both parties had paid the total investment to Joint Venture. In October of 1999, Jinan Beer Group changed its name into Jinan Beer Corporation and registered.
In December of 1998, Canadian Noble brought the litigation in front of Shangdong Supreme People‘s Court and asked to affirm Canadian Noble‘s status as a foreign shareholder in Joint Venture and its relevant investment, to decide the agreement on transferring stock, the agreement on amending the original contract, articles and accessorial documents for Joint Venture signed by the three defendants are void.
JUDGEMENT
Shangdong Higher People‘s Court holds:
1. Canadian Noble claims that it is the shareholder of Joint Venture and enjoys the stock rights to Joint Venture. In term of the provisions of Law of the People‘s Republic of China on Chinese and Foreign Equity Joint Ventures, it shall be approved by the government of China to establish Chinese and foreign equity joint ventures and the relevant agreement, contract and articles signed by the parties shall be examined and approved by the state departments who are in charge of foreign trade and economy. In this case, the name of foreign party recorded on the business certificate submitted by the foreign party of Joint Venture is Hong Kong Noble, and the foreign party of Joint Venture approved by Jinan FETC and Shandong People‘s Government is Hong Kong Noble China Inc., which shows obviously that the foreign party of Joint Venture approved by the government is not Canadian Noble. Moreover, it can be deduced from the contract with legal validity that the foreign party is Noble China Inc., and Mr. Li Jixiang was authorized by the board of Noble China Inc. to sign on the contract. Since the contract is written in Chinese, the Chinese edition shall be the evidence for judging the case. The evidence is lacking for Canadian Noble‘s claim that it is the legal stockholder of Joint Venture because it is the authorized signature instead of the cachet of corporation on the relevant agreement and contract and it cannot provide neither the decision about the project made by its board nor authorization certificate issued by its board. Although the name of Canadian Noble and Hong Kong Noble China Inc. appears in the feasibility reports of Jinan Beer Group, their registered address is Xingde Centre, No. 200, Ganruo Road, Hong Kong instead of the registration place of Canadian Noble. All relevant documents about Joint Venture are drafted by Jinan Beer Group, the Chinese party of Joint Venture, according to the stipulation of contract, which results in the confusion caused by Jinan Beer Group. In order to settle the problem, the parties of Joint Venture unified the name of foreign party as Hong Kong Noble by signing the agreement on amending the contract, articles and accessory documents of Joint Venture Jinan Noble Beer Co. Ltd. on May 8, 1997. In a word, the name "Canadian Noble" has never appeared in any legal documents except for the agreement of intent. All facts prove that Canadian Noble has never been a party of the contract about Joint Venture. On the other hand, according to the evidence of investment provided by Canadian Noble, Canadian Noble indeed transferred capital to the deposit account in Beijing Negotiable Securities Sales Department of China Agriculture Credit Union, which can be proved by the correspondence for urging interest. The capital transferred from Beijing Negotiable Securities Sales Department to Weifang Alkali Factory was loaned by Hong Kong Noble from Beijing Negotiable Securities Sales Department, which can be proved by the contract of loan and the receipt. As far as the capital transferred from Weifang Alkali Factory to Shenzhen Noble and so on, all transference took place after April of 1995. However, Hong Kong Noble had reached an agreement with Jinan Beer Group about the investment as early as February of 1994 and began to invest from April 11, 1994. These facts have no relation with the evidence provided by Canadian Noble. As a public company, Canadian Noble did not declare its important investment project publicly, and cannot provide investment accounting report and other relevant evidence. Therefore, all these facts indicate that Canadian Noble‘s claim for being the stockholder of Joint Venture lacks sufficient evidence.
2. The agreement on transferring stock reached by all parties of Joint Venture has been passed by the board of Joint Venture and approved by Jinan FETC. Since Canadian Noble is not the stockholder of Joint Venture, the court shall not support its demurral to the stock tranference and its litigation against Hong Kong Coastal Co. The court decides to dismiss Canadian Noble‘s claim because the evidences provided by Canadian Noble against other three defendants are not factual or legal.
(大家論壇整理)
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