Securities regulators are now facing more lawsuits and disputes over
companies that are on the brink of being delisted and those that have already
delisted.
Last week, the China Securities Regulatory Commission (CSRC) was sued by two
groups of investors which are minority shareholders of two loss-making companies
delisted in May - Shenzhen Zhongqiao Development Company, and Hubei Jianghu
Ecology Company.
In both cases CSRC had declined to grant an administrative review of the
appeals by shareholders to prevent the companies from being delisted.
CSRC had said the shareholders could not appeal its decision. But the
plaintiffs claim that it was wrong for the regulator to reject their appeal.
Both cases will be heard in the Beijing No 1 Intermediate People's Court.
Three years ago, the court gained much attention when it ruled in favour of a
listing candidate in Hainan Province, against the CSRC for the unreasonable
rejection of its listing application.
This time around, both plaintiffs are awaiting a decision on whether their
cases would be formally accepted and tried.
Yet the lawsuits reflect pitfalls in the delisting regulations. Experts say
that while the issue involves many interest groups, it is the small shareholders
who get hurt.
He Libo, one of the plaintiffs and a small shareholder of Shenzhen Zhongqiao,
said her action was supported and sponsored by many small shareholders.
He Libo said it was hard to ascertain exactly which companies could be
delisted. While being aware that some poor-quality firms continue to be traded
publicly after asset restructuring, she had bet that Zhongqiao would also turn
around.
But her hopes were dashed when the company was removed from the bourses on
May 30 this year.
Then, on June 26, she and some other minority shareholders sought a review of
the CSRC delisting order. But they were told the request would not be accepted a
month after the event.
He Libo said she was aware that there was only a slim chance of a review from
the regulator. She tried nevertheless.
Legal experts are also split on the issue.
Some said CSRC's action was right because only the delisted companies
themselves were entitled to an appeal.
But others said CSRC was at fault in taking a long time to respond. They also
say that standards for administrative review of such disputes were
vague.
