Report extracted from Nanfang Daily 11 June 2001, Title: Different views from two legal system / ST equity issue in new controversy

Strangely, on 31 August 1998, Guangdong Flying Dragon and Jiangnan Branch has completed the equity pledge registration process in Shenzhen Stock Exchange for the acquired share. But on 30 September 1998, Chengdu Lianyi "adhered" to Guangdong Flying Dragon Chairman Zeng Hanlin's request to sign a "Supplementary Agreement" for shares transfer matters. According to the "Supplementary Agreement" terms, in the event that Guangdong Flying Dragon payment obligations are not fulfilled completely to Chengdu Lianyi, the 40% Chengdu Lianyi legal shares will still be in the custody of Chengdu Lianyi, Guangdong Flying Dragon will have no control over or hold any rights to dispose off the shares in any forms of pledge and mortgage. In other words, this supplementary agreement was signed only after Guangdong Flying Dragon and Chengdu Lianyi had completed the shares transfer procedures and changed of names in Shenzhen Stock Exchange, official announcements were made and Jiangnan Branch had also release the loan.

In addition, the fraud case was filled on 18 August 1999, in the same year on 19 August, Chengdu Lianyi did not inform the Bank of Communication Guangzhou Branch on the lodging of the contract fraud case, the Chairman Xu Huaizhong even went up to Guangzhou, together with Jiangnan Branch, Sanjiu Enterprise Group to sign a transfer agreement, transferring 3421.6 million legal shares to Sanjiu Enterprise Group. However, the agreement did not take effect due to Sanjiu Group not being able to raise enough funds.

The two prefectures have different view point on the case

For Guangdong and Sichuan prefecture, both judiciary system (verdict) are different and are each ruled based on the judgments of Civil Economic legal system or Criminal legal system, where both are conviction are made ​​according to the order of law. The conflicts between the two surface during the enforcement stage; this reflects the orientation of the legislation, existing laws and regulations dealt with. It is for the current legal system to decide on whether "the interests acquired in good faith" or "the recovery of stolen goods crime" will give a better value judgments.