Nanjing Kangni Mechanical & Electrical Co Ltd

The Jiangsu Provincial High People's Court has issued a final second-instance judgment in a series of securities misrepresentation liability disputes involving Kangni Mechanical & Electrical. Guotai Haitong Securities was found to have failed to exercise due diligence in Kangni Mechanical & Electrical's major asset restructuring in 2017 and was ordered to bear 50% joint and several liability. In case number 2025 Su Min Zhong 1019, the court upheld the original judgment, requiring Kangni Mechanical & Electrical to compensate investors for losses and pay case acceptance fees totaling 33.09 million yuan. Guotai Haitong, Suya Jincheng, Dongzhou Appraisal, Jia Yuan Law Firm, and two then-serving executives, Chen Yingqi and Gao Wenming, were held jointly liable within ranges of 50%, 40%, 15%, 2%, 2%, and 2%, respectively. In case number 2025 Su Min Zhong 1020, the court revoked the first-instance judgment and instead ordered Kangni Mechanical & Electrical to compensate an institutional investor for investment losses of 99.80 million yuan and pay case acceptance fees of 1.04 million yuan. Guotai Haitong, Suya Jincheng, and the two executives were held jointly liable at 50%, 40%, 2%, and 2%, respectively. Across the two cases, Guotai Haitong's total joint compensation liability exceeds 60 million yuan. This ruling sets a new high for the liability ratio borne by a leading brokerage in similar cases, far exceeding the industry's common range of 10% to 30%.

The Jiangsu Provincial High People's Court issued a final judgment in the securities misrepresentation liability dispute involving Kangni Mechanical & Electrical, revoking the first-instance judgment and ordering Kangni to compensate investors for losses of 99.7993 million yuan. Guotai Haitong, Suya Jincheng, Kangni's former chairman Chen Yingqi, and former vice chairman and president Gao Wenming are jointly and severally liable for 50%, 40%, 2%, and 2% of the compensation obligation, respectively. The case stems from Kangni's acquisition of a 100% stake in Guangdong Longxin Technology Co., Ltd. for 3.4 billion yuan at the end of 2017. Longxin Technology engaged in financial fraud, including inflating revenue and profits, from 2015 to 2017, causing false records in the restructuring report disclosed by Kangni in 2017. As of the announcement date, Kangni has fully fulfilled its compensation obligations to nine ordinary investors and three institutional investors under the judgment, while lawsuits by the remaining three individual investors are in second-instance proceedings. Kangni stated that the company had already made sufficient provisions for estimated liabilities, and this judgment will not have a material impact on the company's current or future profits.