Thousands of shareholders filed a lawsuit against Foshan Lighting for information disclosure violations. Pre-trial evidence exchange was held at the Guangzhou Intermediate People's Court on July 7, and the formal hearing is scheduled for July 9. Relevant sources said that the claim amount in this case is as high as 180 million yuan, and Foshan Lighting's net profit for nearly half a year is at risk of being swallowed up.
Misfortune arises from breach of contract
On March 7, 2013, Foshan Lighting disclosed an announcement regarding the receipt of an administrative penalty decision from the Guangdong Securities Regulatory Bureau of the China Securities Regulatory Commission. The decision letter shows that as many as 15 companies, including Foshan Schnoch California Electric Co., Ltd. and Foshan Hongbang Electrical and Lighting Co., Ltd., are directly or indirectly controlled by relatives such as the son of Zhong Xincai, then chairman and general manager of Foshan Lighting, and are related parties of Foshan Lighting. However, since 2010, Foshan Lighting has concealed the above-mentioned related relationships. At the same time, when transactions with related parties exceeded the disclosure standards without review by the board of directors and failure to make timely announcements, it violated relevant securities laws and regulations. For this reason, the regulatory authorities ordered Foshan Lighting to make corrections, issued a warning, and imposed a fine of 400,000 yuan. The then chairman and general manager Zhong Xincai and others were also punished.
Subsequently, some shareholders successively filed civil claims based on this, and Foshan Lighting also successively announced relevant litigation matters. Wu Lijun, a lawyer at Shanghai Oriental Cambridge Law Firm, said that as of March 15, the number of shareholders who had sued Foshan Lighting reached 1,303, and the compensation amount was as high as 180 million yuan.
According to information obtained by a reporter from China Securities Journal, there are currently more than 30 lawyers across the country representing more than 1,300 shareholders seeking compensation from Foshan Lighting. Among them, 163 shareholders represented by Wu Lijun have claimed more than 15 million yuan.
On July 7, the evidence exchange procedure for all shareholders was successfully completed. "Foshan Lighting has entrusted a total of 8 lawyers and assistants to participate to check the authenticity of the shareholder materials. When the court officially opens on the 9th, the court will ask both parties whether they agree to the settlement. If the listed company also agrees to the settlement, the listed company will bear the liability for compensation. The company's compensation amount is expected to range from 50% to 100% of the claim amount, depending on the time of purchase of each person." Wu Lijun said.
Half-year profits may be swallowed up
This shareholder claim incident has had a greater impact on the governance of Foshan Lighting Company and other aspects. On April 25, 2014, Foshan Lighting issued a special announcement stating that it would establish an investor complaint handling system to establish and improve the investor complaint handling mechanism and further standardize the investor complaint handling work.
Foshan Lighting achieved a net profit of 71.35 million yuan in the first quarter of 2014. Although the company has not yet disclosed a semi-annual report, based on the total net profit of 250 million yuan last year, based on the ratio of 50% to 100% of the claim amount of 180 million yuan, it may swallow up Foshan Lighting's net profit in the past half year.
"And this is not all." Wu Lijun pointed out that in fact, there are more than 100,000 shareholders who meet the conditions for claiming compensation. Currently, more than 1,300 people have participated in the claim litigation, accounting for only 1%. Since the statute of limitations for a claim can be up to March 2015, if the court is held on July 9 and the claim is declared effective, it may lead other shareholders to join the claim action.
Some people in the industry believe that the lawsuit is unlikely to come to a conclusion in the short term. Relevant analysts from CITIC Securities pointed out that there are a large number of people in this lawsuit, and it will take a long time to determine the investors who meet the claim conditions and the amount of their claims. It is expected that the court trial will be difficult to reach a conclusion in the short term.
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