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JunHe Assists a Consortium led by Guangzhou Pharmaceutical Holdings Limited to Participate in the Restructuring of Kangmei Pharmaceutical as a Restructuring Investor

2021.12.15

On December 15, 2021, Kangmei Pharmaceutical (stock code: 600518), an A-share listed company, announced that Kangmei Pharmaceutical and its administrators and the reorganization investor Guangdong Shennongshi Enterprise Management Partnership (Limited Partnership) (hereinafter referred to as "Shennongshi ") completed the signing of the "Investment Agreement on Participation in the Reorganization Process of Kangmei Pharmaceutical”. The signing of the Reorganization Investment Agreement marks the completion of the last key step in the reorganization of Kangmei Pharmaceuticals.


Guangzhou Pharmaceutical Holdings Limited (hereinafter " GPHL") is a wholly-owned enterprise under the State-owned Assets Supervision and Administration Commission of Guangzhou Municipality, and is mainly engaged in the research and development and manufacturing of proprietary Chinese medicines and botanical medicines, chemical raw materials and preparations, biopharmaceuticals, health products, trade logistics and distribution, as well as medical and health services. It is one of the world's top 500 large enterprise groups supported by Guangzhou Municipality.


Kangmei Pharmaceutical is a listed company with the production and sales of traditional Chinese medicine tablets as its core, and "Smart+" health as its service platform, implementing the integrated operation of the whole industrial chain of Chinese medicine. Listed on the main board of the Shanghai Stock Exchange in 2001, Kangmei Pharmaceuticals now has about 130 subsidiaries.


In December 2018, Kangmei Pharmaceutical was investigated by the China Securities Regulatory Commission (CSRC) for alleged information disclosure violations and in May 2020, the CSRC issued administrative penalties and market entry bans against Kangmei Pharmaceutical for information disclosure violations. In June 2021, the Jieyang Intermediate People's Court ("Jieyang Intermediate Court") ruled that the bankruptcy reorganization of Kangmei Pharmaceuticals was accepted, and in November 2021, the Guangzhou Intermediate People's Court ruled that Kangmei Pharmaceuticals should be liable for RMB 2.459 billion to more than 55,000 investors, and that the former actual controller and former supervisors of Kangmei Pharmaceuticals should be held liable for the damages. The relevant directors, supervisors and executives were jointly and severally liable for different percentages of compensation according to their degree of fault. The Kangmei Pharmaceuticals securities dispute is the first special representative action in China for securities disputes, the largest number of plaintiffs and the highest amount of civil compensation for misrepresentation of listed companies heard by the court so far, and a landmark event in the history of China's capital market development.


On November 26, 2021, the Jieyang Intermediate Court ruled to approve the reorganization plan of Kangmei Pharmaceutical. Ltd. Guangdong Yuecai Industry Investment Fund Partnership (Limited Partnership), Guangdong Hengjian Asset Management Co. and Jieyang Jinye Development Co., Ltd.,formed a consortium, led by GPHL, and named Shennongshi as a restructuring investor. It recently reached a restructuring investment agreement with the management of Kangmei Pharmaceuticals, jointly with financial investors Guangfa Securities Co. Ltd. and China Resources SZITIC Trust Co., Ltd. to jointly participate in the reorganization of Kangmei Pharmaceuticals, and transferred 4,145,296,141 shares converted from the capital surplus of Kangmei Pharmaceuticals for a total of RMB 6.5 billion, holding a total of 29.90% of the shares of Kangmei Pharmaceuticals, of which the shareholding ratio of the consortium exceeded 25%, making it the single largest shareholder of Kangmei Pharmaceuticals.


As the legal advisor to the restructuring investors, JunHe completed the legal due diligence of Kangmei Pharmaceuticals and its more than 130 subsidiaries with great efficiency under a very tight schedule, and participated in the whole process of forming the consortium, drafting the restructuring investment plan, filing the restructuring investors, discussing the transaction structure, drafting the transaction documents and negotiating the transaction documents with the administrators and financial investors.  JunHe’s team provided the restructuring investors with high-quality, rigorous and efficient legal services.


The leading partner of this project was ZHANG, Ping.

JunHe is the only Chinese law firm to be admitted as a member of Lex Mundi and Multilaw, two international networks of independent law firms. JunHe and selected top law firms in major European and Asian jurisdictions are “best friends.” Through these connections, we provide high quality legal services to clients doing business throughout the world.