Edge of a precipice

Author: | Published: 1 Aug 2007

In Part I of this two-part series on shareholder actions in China (IFLR June 2007) the focus was on actions brought under the Provisions on the Hearing of Civil Compensation Actions arising from False Statements in the Securities Market, issued by the Supreme People's Court effective as of February 1 2003 (the SPC Interpretation).

Chinese regulatory authorities, mainly (but not exclusively) the China Securities Regulatory Commission (CRSC), hold the key to shareholder actions under the SPC Interpretation in that an action brought under the SPC Interpretation must be brought on the back of an administrative penalty handed down by relevant authorities (such as the CSRC) or a criminal indictment by a People's Court. Without this, no claim can be brought, but with this separate regulatory or criminal action, the floodgates are opened.

The disease is deep-rooted Securities non-compliance is a serious issue in China. Corruption and accounting scandals, price manipulation and...