China's First Share-Transfer Debt Payment for Joint LiabilityThe Beijing No. 2 Intermediate Court has successfully handled China's first share-transfer debt payment for joint liability.The Huacheng Investment Co. was obliged by the court to trade off its shares to pay 70 million yuan (US$8.4 million) of debt for its warranted company, the Huacheng Finance Co. Huacheng Finance Co. was sued by the state-owned China Nuclear Energy Industry Co. for its default on a 56 million yuan (US$6.7 million) debt payment in 1998. The parent company, Huacheng Investment, failed to pay off 15 million yuan (US$1.8 million) of stock ownership transfer fees in 1999 to the Yueyang State Asset Management Co. The two defaults continued after the court's intercession period. To curb the outflow of state assets, the court froze the 38.7 million shares owned by the Yueyang Hengli Co., a listed subsidiary of the Huacheng Investment Co. Approved by the Ministry of Finance, the court ordered Huacheng's affiliated companies to use the "Yueyang Hengli" shares to pay off the parent company's debt. The share-to-equity transfer was made on November 7 in the Shenzhen Stock Exchanges, when the stock of "Yueyang Hengli" was suspended for half a day, before trading resumed for the transfer transaction. The transaction, monitored by the court staff, has assured the priority purchase of creditors. |
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