CX Daily: Why More Chinese Companies Are Getting Sued by Aggrieved Investors

Lawsuits /

In Depth: Why more Chinese companies are getting sued by aggrieved investors

Class-action lawsuits against listed companies are popular in the United States as a cost-effective way for investors to recover losses suffered from a drop in the price of their shares after wrongdoing such as false information disclosure is exposed.

Yet in China, this type of civil lawsuit was not allowed until 2020, when the revised Securities Law went into effect. That gave shareholders the right, for the first time ever, to collectively sue companies for losses suffered as a result of corporate wrongdoing through a mechanism called representative action (代表人诉讼), a variation on the class-action lawsuit system used in developed markets.