Recently, Genertec Kunming Machine Tool Co., Ltd. (hereafter referred to as “ Kunming Machine Tool”, stock code: 400068) has issued an announcement that China General Technology (Group) Holding Co., Ltd. (“Genertec Group”) has acquired 77.14% equity in Kunming Machine Tool through bankruptcy and reorganization proceedings, becoming the biggest shareholder and controlling shareholder of Kunming Machine Tool. ZhongYin has represented the administrators on the bankruptcy and reorganization of Kunming Machine Tool, successfully assisted with the reorganization of Kunming Machine Tool, which also is a high profile case in the bankruptcy and reorganization practice of ZhongYin.

The predecessor of Kunming Machine Tool was Central Machine Factory established in 1936, and it was renamed as Kunming Machine Tool Factory in 1953, was officially registered as a joint stock limited company on October 19, 1993, offered shares and listed on Hong Kong Stock Exchange (“HKEX”) in December 1993, becoming one of China’s first nine pilot standardized joint stock companies listed in Hong Kong, offered shares and listed on Shanghai Stock Exchange (“SSE”) in January 1994, and was the only A+H-share listed company in Yunnan Province and the domestic equipment industry. Kunming Machine Tool is a key enterprise manufacturing large precision machine tools in China, is recognized as one of the “Eighteen Arhats” in China’s machine tool industry, and has developed more than 140 products which are “first of its kind in China”. In recent years, affected by internal and external factors such as cyclical fluctuations, Kunming Machine Tool was delisted from SSE and HKEX successively, and then got into operational difficulties due to shortage of funds.

The government-court coordinating mechanism has been adopted in the reorganization of Kunming Machine Tool, as China’s first A+H-share listed company that undergoes bankruptcy and reorganization after delisting. After consideration of the differences in the general delisting regulations between Chinese mainland and Hong Kong as well as the subsequent needs for capital operation, Zhongyin innovatively adopted the approaches for equity adjustments among the investors combining “share reduction in proportion, transfer of original shareholder’s equity, deregistration of H shares, waive of major shareholder’s claims to form capital reserve, and compensation to H-share shareholders” to realize clearing and delisting of the reserved left share, set aside internally funded increment shares formed by capital reserve, and compensate the H share shareholders by the disposed cash . Such deregistration and compensation arrangements have creatively solved the problem of “zombie shares” left over after the delisting from HKEX and protected the legitimate rights and interests of H-share shareholders, and have been recognized by regulators in Chinese mainland and Hong Kong, opening up a new practical path for the disposal of shares of H-share listed companies after delisting.

In the reorganization of Kunming Machine Tool, ZhongYin has adopted a series of innovative solutions by law to resolve problems left over from the past, such as renewed lease and continued use of Ciba plant, continued construction and relocation of Yanglin base, divestiture and disposal of inefficient and ineffective assets, water and power supply in living areas, and overcome many difficulties in arranging for satisfaction of financial debts and other “senior debts secured by specific properties”. ZhongYin has also, by giving full play to its professional advantages in the area of capital market, creatively adopted the model of “entrusting China Securities Legal Services Center to verify securities investors’ losses and using verification results as an important reference for reviewing and affirming relevant minority shareholders’ claims”, and reviewed and affirmed a large number of minority shareholders’ claims arising from securities misrepresentations efficiently b law. ZhongYin represented domestic and foreign litigations and arbitrations proceedings for securities misrepresentations of Kunming Machine Tool, participated in and provided legal guidance on Kunming Machine Tool’s information disclosure, and provided comprehensive and practical solutions to the administrators of Kunming Machine Tool. Through the joint efforts of all members of the team, Kunming Machine Tool’s debts of up to RMB 1.7 billion have been resolved in an optimal manner, and its creditors’ interests have been protected to the fullest extent.

In the capacity of an administrator and a member of the joint meeting of administrators, Wu Zetao, a senior partner of ZhongYin Law Firm, took overall charge of this project as legal counsel. Jia Xingpeng served as on-site project leader, and Peng Xinzhen and Su Dan served as lead attorneys. The project team members also included Yin Kuan, Wang Xiaosong, Jin Yu, Huang Danyue, Gong Fu, Liu Zhenyu, Sun Zhaojie, Wang Qiong, Yun Zhaolin, Zhang Huawei and so on. Moreover, colleagues from ZhongYin (Kunming) also provided strong support for this project. The success of this project is inseparable from the joint efforts of all project team members and colleagues from ZhongYin offices.