Xinjiang Yiming Real Estate Development Co., Ltd. v. Jin Shengli (Retrial on Harmful Related-Party Transactions)
On retrial, the high court held that the actual controller had improperly transferred RMB 7 million from the company in the name of paying for goods and used it personally, thereby diverting company assets through an affiliated relationship. An unaudited clean-up report and an estimated profit-distribution resolution were not enough to establish lawful distributable profits or a valid set-off against the controller's repayment duty, especially where dealings with affiliated companies had been blended together. The prior judgments were reversed and repayment with interest was ordered.
Holding
On retrial, the high court held that the actual controller had improperly transferred RMB 7 million from the company in the name of paying for goods and used it personally, thereby diverting company assets through an affiliated relationship. An unaudited clean-up report and an estimated profit-distribution resolution were not enough to establish lawful distributable profits or a valid set-off against the controller's repayment duty, especially where dealings with affiliated companies had been blended together. The prior judgments were reversed and repayment with interest was ordered.