62 63 Accurately Identify and Ascertain Case Facts in Accordance withLaw; Clarify the Legal Relationship in Significant and Complex Transactions CASE INTRODUCTION Shi XX and a third party, Feng XX, are partners and cooperatively established XX real estate company (in which Shi XX holds 48% of the shares and Feng XX holds 52% of the shares). Thereafter, XX investment company was registered and incorporated in the name of XX real estate company (XX real estate company is the sole shareholder of the investment company). In early 2014, Shi and Feng made an agreement that Shi would raise RMB 1 billion to the real estate company to purchase a plot of land, but the investment failed and the funds were temporarily deposited in the account of the real estate company. In March, 2014, Shi, the investment company and the original shareholders of XX orchard company signed an Equity Transfer Agreement and a supplementary agreement, pursuant to which Shi and the investment company would respectively receive 10% and 90% of the equities of XX orchard company. Thereafter, Shi paid the transfer price of 100% of the equity fee to XX investment company through XX real estate company, which in turn paid the same to the original shareholder. XX orchard company completed the registration procedures for equity transfer and the new shareholder. In April 2014, Shi and Feng signed a Memorandum of XX orchard company (hereinafter referred to as the memorandum) in which confirms that the investment company, whose shares are held by Feng and Shi, shall acquire equity interest of XX orchard company and that the investment company and Shi would respectively hold 90% and 10% of the equity. Based on the agreement: Firstly,if the land held by the orchard company continues to engage in agricultural planting and operation activities, the capital investment and operation management shall be the responsibility of Shi, and the profits shall belong to Shi; Secondly, if the land held by the orchard company is required by the government for industrial or commercial development, Shi and Feng will bear the development and construction funds according to their shares, and share the profits in proportion to their shareholding ratios. From April to May 2014, Shi and the investment company signed a confirmation letter in which the parties confirmed their equity percentage in XX orchard company and agreed upon expenses assumption. Thereafter, Shi requested the investment company to repay the payments he made on behalf of it in order to acquire 90% of the equity interest in RMB410 million in XX orchard company, but the request failed. In January 2017, a lawsuit was brought to the Higher People’s Court of Guangdong Province, claiming the investment company for repayment of the loan principal and interest of about RMB480 million, and the real estate company and the orchard company to bear joint and several liability for the above claim. After trial, the Higher People’s Court of Guangdong Province held that the fund advanced by Shi for the investment company to acquire the equities of the orchard company was not of the nature of private lending, that is to say, there was no private lending relationship between Shi and the investment company with the following main reasons:Firstly, there was no lending agreement between the two parties, that is, there was no lending agreement and Shi did not provide any evidence proving the existence of lending agreement or expression of intent between the two parties; Secondly, although the payment was made between the two parties, Shi advanced the investment funds for the CHAPTER 4
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