Dispute between the plaintiffs (Gao Shunji and Li Xi) and the defendants (Pu Jiang and Beijing Xuanwei Wood Industry Co., Ltd) as well as the third-parties (Beijing Dongshang Shengrui Asset Management Co., Ltd and Beijing Jiarun Chuangying Investment Co., Ltd) over alleged infringement of shareholders' interests

Abstract of judgment:

The case is about dispute over the infringement of the lawful interests of shareholders and also entails project cooperation between litigants and the third parties as well as the clearing and settlement of investment. The court conducted investigations over whether board directors, supervisors and other senior-ranking people on the defendant side had harmed the legal rights of the shareholders in accordance with Article 152 of China's Company Law. The investigations showed that several shareholders had colluded with non-shareholder investors to make an investment with their own capital into third-party enterprises in the name of the defendant company and that all business transactions were conducted in the name of the alleged company as well. Therefore, it was the controversial company rather than investors that should duly fulfill rights and protect interests in accordance with the contract concerned. The defendant company is thus entitled to ask for compensation when its executives are found to have directly harmed corporate interests in business interactions with others on behalf of the company. So the plaintiff side in this case cannot bypass the defendant company to lodge a lawsuit demanding economic compensation for the losses of shareholders, including themselves. The court turned down the request of the two natural persons on the plaintiff side partially because of their failure to render a proof of their losses.