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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 118190
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I have a preliminary question to plan a litigation strategy

Customer Question

I have a preliminary question to plan a litigation strategy taking place in China and the US.
Company A, a Chinese company and the client in this question, has established a China-based joint venture (JV) with Company B, another Chinese company, each holding 40% and 60% shares in the JV respectively. Company A has fully paid its capital commitment to the JV, Company B has only paid half of its capital commitment and the other half has already due and remains outstanding.
Under Chinese law and relevant contracts, Company A and the JV have a right to claim for the unpaid capital commitment against Company B. Company A has provided a shareholder loan equal to about US$5 million to the JV (Shareholder Loan), which became due and payable in 2015. Due to lack of cash, the JV is not capable of repaying the Shareholder Loan to Company A, enabling Company A to claim for repayment of the Shareholder Loan against the JV under Chinese law.
Company A would like to commence proceedings against the JV and Company B, however, the only valuable asset owned by the JV is a fully owned Texas subsidiary (Texas Subsidiary). The market value of which is US$5 million.
Company A would like to file a claim against Company B in China for the outstanding obligations related to the capital commitment. Company A's primary concern is whether it may also file for an injunction in US courts or other interim measure to prevent unauthorized disposal or enforcement of the shares of the Texas Subsidiary by Company B or the creditors of the JV or the Texas Subsidiary. It is known that currently there is no encumbrance placed on the shares of the Texas Subsidiary.
Submitted: 3 months ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 3 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
You would need to get the injunction issued in the Chinese court first and then you would file a petition to enforce foreign order in the Texas court to enforce the Chinese court injunction against disposal of the company. You can get an injunction to forbid disposal of any assets pending the outcome of the litigation.
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Customer: replied 3 months ago.
Thanks for the answer. Do you have any estimation of the likelihood of success of obtaining an injunction in a US court after obtaining an injunction in a Chinese court? What if there is no injunction from a Chinese court?
Expert:  Law Educator, Esq. replied 3 months ago.
Thank you for your reply.
The US Courts are more friendly to these foreign injunctions from civil cases than the Chinese courts are to US orders. What I mean is that as long as the US court sees that the company owner was notified and had their rights in the Chinese court to defend against the injunction, the US courts will uphold the order.
If there is no injunction from the Chinese court the US courts will not generally get involved because this is a case regarding an issue that occurred in China.
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Expert:  Law Educator, Esq. replied 3 months ago.

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