Recently, Zhong Lun advised a Hong Kong-listed state-owned financial asset management company and its Hong Kong investment platform (“Clients") on the litigation and enforcement proceedings in a case concerning over USD 100 million overseas loan under domestic guarantee, securing a favorable result for the Clients. With such a massive disputed amount and more than ten parties involved, this case covers a wide range of complicated and entangled domestic and foreign legal issues, including the validity of contract, cross-border guarantee, registration of overseas loan, accession to debts, determination of illegal deduction from a loan principal, dispute over shareholder control, impact of the criminal proceedings on the civil proceedings, potential bankruptcy proceedings, the application of the laws of Hong Kong SAR, etc. This case also involves the coordination of multiple court proceedings, such as litigation, interim measure application, settlement and mediation, and enforcement. This is a fine example where the procedurals and substantives are skillfully balanced, while the litigations and other alternative dispute resolution processes are effectively combined, so as to achieve the thorough and successful resolution of the dispute. The case is testimony to Zhong Lun’s rich experience and unique expertise in handling financial investment disputes. The team led by partner Wilson Huo provided legal services to the Clients throughout the entire process of this case.

In this case, a well-known domestic new energy automobile enterprise (“Debtor") obtained a loan of USD 100 million from the Clients through the group company it established in Hong Kong and promised that it would assume joint obligation for the repayment with the Hong Kong group company. The Debtor’s de facto controller and its affiliates in Hong Kong and China’s mainland also provided guarantees for the loan. In the performance of the loan contract, a famous domestic electrical appliance manufacturing group acquired the Debtor’s certain equities and thereby took control of the Debtor. The loan was later overdue and the dispute therefore arose.

When the Clients engaged us, they had planned to negotiate with the Debtor before initiating legal proceedings, but in view of the Debtor’s unpromising solvency, its internal control dispute among its shareholders and the intricacy of its debt relationship, in order to prevent the Debtor from evading its repayment obligation by transferring assets or even conspiring with other related parties to deceive the Clients, Zhong Lun advised the Clients to file a lawsuit and take asset preservation measures against the Debtor and domestic guarantors (collectively "Counterparties") as soon as possible, so as to “use litigation to obtain settlement", whether voluntarily or via mediation, with the Counterparties in the litigation. The proactive approach effectively helped the Clients steer away from the mire of tedious and futile negotiations.

Upon the Clients’ consent, Zhong Lun promptly completed the filing of the lawsuit and the application for asset preservation on behalf of the Clients with the High People’s Court of Guangdong Province, and assisted the court in freezing the funds worth more than RMB 500 million held in the Counterparties’ bank accounts together with the equity interests held by the Counterparties, thereby successfully achieving the preservation of the full disputed amount in a relatively short period of time. At the same time, Zhong Lun, on the one hand, broke through the numerous legal obstacles set by the Counterparties and, on the other hand, through nearly ten hearings, successfully persuaded the court to uphold the majority of our pleadings and submissions.

Pressured by the litigation and asset preservation, the Counterparties voiced their intention for settlement. Zhong Lun seized this opportunity and took full advantage of the firm’s strengths in both dispute resolution and business transactions to assist the Clients to finally reach a once-and-for-all settlement agreement with the Counterparties, by virtue of which the Clients avoided the appeal proceedings before the Supreme People’s Court and obtained an enforceable civil mediation award. Zhong Lun then assisted the Clients to successfully recover the initial settlement payment within two months through the court enforcement proceeding.

Against the backdrop of increasing uncertainties in the global economic environment and frequent defaults in cross-border financing projects, and with the financial regulation intensified, financial disputes have become increasingly complex and specialized. Zhong Lun will continue to utilize its expertise and experience to provide clients with high-quality, professional and efficient legal services in financial and investment dispute resolution.