China Sees First Class-Action Lawsuit Against Listed Company

What’s new: A court in southern China’s Guangzhou city accepted a lawsuit filed by a group of retail investors through a special representative against Kangmei Pharmaceutical Co. on fraud allegations, marking the first ever class-action lawsuit against a listed company in China.

The China Securities Investor Service Centre (CSISC), a government-backed body, is suing Kangmei on behalf of 56 investors, according to the court document released Friday.

Kangmei, one of the country’s biggest listed drugmakers, was accused of financial reporting fraud involving 88.6 billion yuan ($12.6 billion) of overstatements between 2016 and 2018.

Why it matters: The China Securities Regulatory Commission in a separate statement called the lawsuit a landmark case in China’s capital market.

China introduced the class-action mechanism to the capital market last year, offering a new channel for investors to seek legal protection from criminal activities such as false statements, insider trading and market rigging. Previously, numerous investors, especially medium and small investors, have little access to judicial remedies after suffering a loss.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Han Wei (weihan@caixin.com)

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