In 2014, Chengdu Bangbangwa Industry Co., Ltd. (“Bangbangwa”) signed the Share Transfer Contract and the Guarantee Contract with its shareholders SEAF Sichuan SME Investment Fund LLC (“SEAF”) and Li Yong, whereby they agreed that SEAF would transfer all of its shares to Li Yong and that Bangbangwa, as the guarantor, would provide joint and several guarantee for the full and timely payment of the share transfer price. The major subject matters contained in the said Share Transfer Contract and Guarantee Contract were approved by the shareholders' meeting and the board of directors. A dispute arose when Li Yong failed to pay the share transfer price in full as scheduled.
The following two points are in dispute: 1. As a Delaware company, whether SEAF was a proper party of the litigation and whether its legal representative was qualified; 2. the validity of the guarantee provided for share transfer among its shareholders. After being entrusted, on the one hand, ZHH guided SEAF to prepare overseas qualification documents, including the certificate of incorporation and documents produced by all shareholders to authorize the legal representative; on the other hand, ZHH referred to approval documents of a joint venture issued by the industrial and commercial bureau and the commerce bureau at the time of incorporation to further justify the identification of the legal representative. Meanwhile, ZHH's lawyers fully explained the validity of the guarantee by reference to cases of the Supreme Court and based on the facts of this case. Finally, our exhibits and opinions were supported by the court.
This case provides reference for the notes for civil litigation in China where foreign-related parties are involved and the procedures to be performed by the companies to provide guarantee for share transfer among their shareholders.
This project was led by Partners LI Jing and WANG Fei.