A mainland Chinese court has claimed jurisdiction over an investor lawsuit against a Hong Kong-listed company for the first time, a move that may heighten scrutiny of corporate disclosures.
Mainland investors filed the lawsuit with the Beijing Financial Court, alleging that an overseas-incorporated company failed to disclose irregular loans, unauthorized guarantees, and related-party transactions during 2017 and 2018, violating Hong Kong’s listing rules. The company, whose name has not been disclosed, was suspended from trading and subsequently delisted in January 2021, leaving shareholders unable to sell their holdings.
More than 40 investors have joined the litigation, according to a report by Financial News, a newspaper supervised by the People’s Bank of China.
Mainland investors are increasingly active in Hong Kong-listed shares through channels such as the Stock Connect programme. In the first half of this year, 84 mainland companies accounted for approximately US$26 billion of the US$26.4 billion raised via Hong Kong initial public offerings and secondary listings.
The Beijing Financial Court, established in 2021, asserted jurisdiction by applying the extraterritorial provisions of China’s Securities Law.
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