We recently posted about the landmark, investor-led lawsuit being brought against accounting firm Deloitte over its auditing of Kelon Electric Holdings. Round one of the case has been concluded, with Shanghai’s Huangpu People’s Court rejecting the case…
The Shanghai Daily reports:
- ”The rejection was based on a legal definition given by the Supreme People’s Court in January 2003 that the securities watchdog’s judgment is required for taking such cases, but the China Securities Regulatory Commission hasn’t finalized its hearing against Deloitte.
The shareholder’s lawyer, Tu Yong, however, said the plaintiff filed the case under the new Securities Law which was effective since January and which does not include such a requirement.
“That’s not acceptable because we were suing under the new securities law and now the court rejects the suit with a rather older explanation given by the supreme court,” said Tu, an attorney with Shanghai Brilliance Law firm.
The plaintiff is now waiting for the Huangpu court to confirm its decision in a document which is due early next week, and is determined that the issue is far from being over.
“We will probably file the lawsuit to the intermediate court within 10 days after we receive the document,” said Tu. “And we are trying to gather minority shareholders to agree to ask Kelon to sue against Deloitte.”
The plaintiff posted a notice in the Shanghai Securities News yesterday asking shareholders to act. The request for Kelon to sue Deloitte will be possible if they together hold at least 1 percent of the total shares outstanding.”
So, to recap: it is the first lawsuit of its kind, is based on a new law that is only 3 months old, involves parallel action by the regulator, grass-roots shareholder activism…and claims that a leading foreign accounting firm should be held responsible for missing accounting irregularities at a scandal-ridden Chinese firm. The usual, heady mix of China business news!
There is obviously more to come on this, and we will keep an eye on developments.
Court snubs shareholder suit versus Deloitte
Shanghai Daily, China – Apr 6, 2006
… given by the Supreme People’s Court in January … taking such cases, but the China Securities Regulatory Commission hasn’t finalized its hearing against Deloitte. …