A wise person does not fall in love.

Chapter 2

Until last year, the two had agreed to divorce. They had no children, and each kept their own property, but neither was willing to give up "Qingshui Cuoluo." Thus, the shareholding remained the same, with Liao holding 51% and Xu holding 49%, making it a peaceful and dignified breakup.

However, shortly after the formalities were completed, Liao, as the majority shareholder, signed a contract on behalf of the company, selling all the shares for 5 million RMB.

With this transaction completed, Xu was out. Based on her shareholding, she could only get less than half of the price, about 2.5 million.

Xu believed the shares were grossly undervalued and that the transaction clearly harmed her interests. Unable to reach an agreement, Xu told Liao they'd meet in court.

"To whom were the shares sold?" Qi Song asked.

Yang Jiali said, "The buyer is also a Cayman company, with only one shareholder, Liao himself."

Qi Song was not surprised and simply said, "After the 20-year amendment, Cayman companies are no longer black boxes. The registry can look up all the registered company's directors and officers. Xu Mo must have already grasped this."

Yang Jiali nodded. Jiang Yuan thought he couldn't handle the case and brought in Qi Song, but Qi Song didn't think so and wanted to argue his point.

Lowering the price, self-dealing, spending 250 to buy out his ex-wife, and usurping the fruits of their joint venture – to the average person, this might seem like damning evidence and a cause for outrage. However, from a lawyer's perspective, it was a completely different matter.

Take Yang Jiali, for instance, the new rising star in the dispute resolution team after Qi Song. He studied in the UK and graduated from a prestigious university. He has not only passed the bar in mainland China but also holds qualifications in Hong Kong, the UK, and California. He specializes in cross-border cases within the team.

Before the formal lawsuit, he had already conducted extensive legal research, listing possible litigation strategies the plaintiff might adopt. Now, he wrote them on the glass whiteboard in the conference room, explaining to Qi Song:

"This case won't go through under China's Company Law. The benefits of derivative litigation go to the company. Even if Xu Mo wins, the compensation would go to 'Qingshui Cuoluo,' which is completely controlled by Liao. This would lead to issues of distribution and enforcement of the compensation, and Xu would get nothing.

"If Xu sues in Cayman courts, under Section 46 (Shareholder Buyback), Section 62 (Preemptive Rights), and Section 175 (Disposition of Assets Exceeding 50% Requires Shareholder Meeting Resolution) of the Cayman Companies Law, the case still won't go through.

"This is because when Qingshui set up the Cayman company, Liao was the registrant. He drafted the company's articles of association, excluding these rights and exempting related-party transactions and conflicts of interest. So, this self-dealing transaction is actually legal in Cayman and cannot be annulled."

Although the timeline on the whiteboard was clear, Qi Song flipped through the materials, seeing that it was in 2019, just over a year after they got married. As he mentioned earlier, the amendment to the Cayman Companies Law had not yet been enacted at that time, so there was no need to publicly disclose the company structure at the registry. Unless sued, it would be difficult to verify the shareholders, directors, and ultimate beneficiaries. Liao probably had planned this back then, leaving himself a backup plan.

Yang Jiali noticed his thoughts and joked, "She probably let him handle everything because they were newlyweds and in love..."

"Love."

Qi Song did not comment but merely reminded him, "There's also the unfair prejudice claim."

"Right, Section 184I of the Cayman Companies Law," Yang Jiali continued. "This might work, but the litigation costs are very high. According to Mr. Liao, Xu Mo's financial situation hasn't been good since the divorce, and she can't afford the fees for Cayman lawyers."

Qi Song said, "She could sue in China but apply Cayman law."

Yang Jiali nodded, showing he had not overlooked this point: "This is actually Xu's only viable option, but there are very few precedents for this, and the litigation difficulty is high. Also, I looked into the opposing lawyer..."

"Who is it?" Qi Song asked.

"Xu Mo found a friend-recommended agent, a female lecturer at a political and legal university, who moonlights as a lawyer at a small firm. Searching her name on the judicial document website yields only a few relevant records, all related to family matters such as support, inheritance, and property division."

In other words, she had no team and no experience in cross-border commercial litigation.

Qi Song felt a slight discomfort and asked, "What did you plan to do then?"

Yang Jiali replied, "I planned to wait and see how Xu Mo's side filed the case, then arrange a second negotiation."

Qi Song asked again, "And what did Mr. Liao say?"

"Mr. Liao agreed, with the condition that the settlement amount should still be negotiated at 2.5 million, with a maximum of no more than 3 million."

After hearing this, Qi Song chuckled lightly.

Saying "see you in court" might not even result in a successful filing. Yang Jiali didn't really say this, but he certainly thought it, so he was overly optimistic when communicating with the client, making later negotiations more difficult for himself. Liao Zhijie probably thought, "If the opponent is so hard, and you're so capable..."

Unexpectedly, within two weeks, the court issued the complaint, and the case was filed.

The other side had also eliminated all the unfeasible routes and accurately found the only viable entry point – suing in China, applying Cayman law. They claimed that Liao Zhijie had transferred the shares at an unreasonably low price to a company wholly owned by himself, violating the duties of good faith, honesty, and exercising power for the best interest of the company and for a reasonable purpose. He was subjectively malicious and objectively caused unfair harm to Xu Mo, and therefore, they demanded that Liao Zhijie compensate Xu Mo for economic losses of 21 million RMB.

Yang Jiali was taken aback but still believed the other side was just playing mind games, intending to make Liao initiate a settlement and then set conditions. The gap between 21 million and 2.5 million was too large, clearly waiting for a counteroffer.

He advised Mr. Liao to stay calm and submitted a defense on behalf of the defendant, arguing that Liao had conducted an asset evaluation before the transaction. The price of 5 million was based on a professional appraisal report, and there was no so-called unfair harm.

Then came a month's evidence period. Both sides exchanged evidence, and the litigation process proceeded step by step.

Once again, to Yang Jiali's surprise, the other side did not propose a settlement but successfully applied for a travel ban and asset preservation.

Liao Zhijie had work to do and needed to travel back to Hong Kong regularly, so he eventually took a step back and proposed a negotiation, raising the settlement amount to 5 million. Coincidentally, the court organized a pre-trial meeting, arranging for both parties to meet. This was to further understand the case and to discuss the possibility of a settlement. If the negotiation fell through this time, they would indeed see each other in court. The M&A group felt the situation was becoming passive, so Jiang Yuan sought out Qi Song at this time.

The meeting was scheduled for the next day, and Qi Song had no time to meet Liao Zhijie in person. After reviewing the materials, he confirmed with Yang Jiali, "That asset evaluation is the key evidence. Did you discuss it clearly with the client?"

"I've read the report in full, it's from one of the Big Four, and I got confirmation from the signing appraiser, no problem." Yang Jiali was confident. "If Xu has objections to the result, she can apply for a reassessment. But 'Qingshui Cuoluo' is not a traditional production and sales company with tangible assets like factories, machines, showrooms, and inventory that can be appraised. And precisely because of this shareholder dispute, the company's operating conditions have changed significantly over the past few months, with the team disbanding, contract breaches, and episodes being discontinued on several platforms. Even if a reassessment is done now, it cannot support the amount she's claiming."

The situation itself was messy, but the reasoning was sound. Terms like good faith, honesty, best interest, and reasonable purpose are subject to interpretation, not objective facts. You say he was unreasonable – how do you prove it? You say you lost 21 million – how do you prove it?