Jianping Wang, majority shareholder in bottled water exporter One Pure, finds business operations are being hampered by the financial woes of minority shareholder Yongnan Kang who has gone missing, whereabouts unknown.
Mr Kang initially ran into financial difficulties following default on a RMB fifteen million loan from Guangzhou Dongjiang Petroleum. A charging order was imposed by Dongjiang on Mr Kang’s twenty-five per cent shareholding in One Pure International Group; a first step towards enforcing a court judgment issued by a Guanzhou court in China. Dongjiang is currently owed some $3.25 million.
Adding to Mr Kang’s financial difficulties, fellow One Pure shareholder Mr Wang is looking to recover from him $23.7 million; in part, compensation for what an arbitrator ruled was a breach of contract in Mr Kang’s $33.6 million sale to Mr Wang of a seventy-five per cent One Pure stake in 2018. Mr Wang had a second charging order placed over Mr Kang’s minority One Pure shareholding.
A charging order has the effect of ‘freezing’ an asset, prior to a forced sale.
Mr Wang subsequently told the High Court these two charging orders were hampering One Pure’s business operations. He said the charging orders should be removed; the shares were no longer Mr Kang’s property as he no longer had any right to the shares. Since Mr Kang was a ‘defaulting party,’ terms of their shareholders’ agreement meant Mr Kang’s shareholding was forfeit; the shares had passed to him, Mr Wang said.
Justice Peters ruled there was no automatic transfer. If Mr Kang is a ‘defaulting party,’ then any share transfer requires his One Pure shareholding to first be valued. This had not been done.
She further ruled that the Dongjiang charging order should remain for recovery of its China court judgment. Dongjiang said it would remove its charging order only if paid the lesser of either the $3.25 million owed or the value of Mr Kang’s twenty-five per cent One Pure shareholding.
Wang v. Kang – High Court (9.05.23)
23.061