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Foshan Lighting claims case reaches deadlock, mediation unlikely to succeed

Two years after Foshan Lighting (000541)’s penalties for information disclosure violations were exposed, the shareholders of the company who claimed compensation finally came to court. However, Ta Kung Pao reporters learned in Foshan that the current opinions of the two parties are so different that mediation is almost impossible. Foshan Lighting also told reporters that if the plaintiff still adheres to its original appeal, the lawsuit will be fought to the end.
Qiansan shareholders claimed nearly 200 million yuan
Before the trial, the number of shareholders suing Foshan Lighting reached more than 1,300, and the amount of compensation claimed was as high as 180 million yuan (RMB, the same below). Due to the large number of shareholders involved, the Guangzhou Intermediate People's Court, which accepted the case, decided to hear the case in batches. The first batch of cases held their first hearing on July 9. They are currently in the judicial appraisal stage and have not yet pronounced a verdict. The second batch of cases will be heard for one consecutive week from August 25 to 29.
Lawyer Wang Zhibin represented 600 shareholders in this claim case. He revealed to this reporter that the disputes between the two parties in the case mainly focused on two points. One was whether Foshan Lighting constituted a false statement, and the other was whether there was a causal relationship between the investors' losses and Foshan Lighting's misrepresentation. He also pointed out that during the administrative penalty process, Foshan Lighting recognized the China Securities Regulatory Commission’s determination of its false statements, while in the civil litigation, Foshan Lighting denied the existence of false statements, violating the principle of estoppel (legal terminology, that is, people are responsible for their own words during civil litigation and may not arbitrarily make statements or actions that negate previous statements).
The probability of successful mediation is low
At the same time, the relevant person in charge of Foshan Lighting told a reporter from Ta Kung Pao that in accordance with the "Several Provisions of the Supreme People's Court on the Trial of Civil Compensation Cases Caused by False Statements in the Securities Market", false statements in the securities market refer to false records, misleading statements, major omissions during disclosure, and improper disclosure of information by information disclosure obligors during the issuance or trading of securities of major events that are contrary to the truth. He said that Foshan Lighting was only an omission in disclosure, not a major event, and the amount accounted for a very small proportion of net assets. Therefore, the company believed that it did not constitute a false statement in the securities market as stipulated in the "Judicial Interpretation". That is, administrative penalties do not necessarily lead to civil compensation.
In this regard, Foshan Lighting believes that there is no direct causal relationship between the omission of disclosure and the shareholder’s investment losses, the company should not compensate, and the shareholder’s claim amount is extremely unreasonable. He also stated that if shareholders still insist on claiming compensation, Foshan Lighting will fight the lawsuit to the end. A Ta Kung Pao reporter learned from the Guangzhou Intermediate People’s Court that the opinions of the two parties differed greatly. Judging from the current attitudes of both parties, the likelihood of successful court mediation is low.

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