South China sues software firm for 210m yuan

HK conglomerate takes Sinosoft to court again over the breach of a joint-venture agreement

PUBLISHED : Thursday, 20 June, 2013, 12:00am
UPDATED : Thursday, 20 June, 2013, 3:53am

South China has filed a civil lawsuit on the mainland against Alibaba-backed listing candidate Sinosoft Technology for up to 210 million yuan (HK$264.2 million) in compensation after the software developer breached a joint-venture agreement.

The Hong Kong-listed conglomerate controlled by Robert Ng Hung-sang, which owns travel services and is involved in the trading and manufacturing of jewellery products, said it hoped to reclaim the financial losses as the mainland partner "violated the anti-competition agreement" and had used "resources in the joint venture" to support its own software design.

South China invested four million yuan for a 66.7 per cent stake in the venture in 2000, while Sinosoft owned the rest.

Christina Cheung Choi-ngor, a director of South China, said the latest lawsuit against Sinosoft in Nanjing was aimed to compensate the firm for its investment in the venture as well as the ownership and copyrights of 58 software programs after a nine-year legal battle.

South China has filed a lawsuit against Sinosoft almost every year since 2004, but it withdrew some of the indictments, citing "unfair treatment" and "power abuse".

"An internal discussion is still ongoing on whether we should use other means to fight for our rights," said Cheung.

She did not rule out the possibility of taking legal action in Hong Kong to halt Sinosoft's listing plan.

Sinosoft kicked off the listing roadshow yesterday in a bid to raise about US$58 million in Hong Kong. It planned to sell 300 million shares, or 30 per cent of the enlarged capital, a term sheet showed. It offered an indicative price range of HK$1.22 to HK$1.50 per share, or up to 15.5 times its earnings last year.

Sinosoft mainly develops and markets export tax software and related services, e-government solutions, carbon management solutions and information integration software. Jack Ma Yun's flagship Alibaba will own about a 13.75 per cent stake after listing. Pricing is scheduled for June 26.

Cheung said South China acted as "a hands-free angel investor" in the joint venture and assigned only one financial controller to monitor its operations.

South China first initiated arbitration proceedings in 2004, when it found that Sinosoft had exploited the shared resources to benefit itself and then discovered "a substantial loss". The company requested five million yuan in compensation and asked Sinosoft to cease software and hardware development.

Later, it began legal proceedings in Nanjing but the court dismissed its claim as the joint venture was in a state of liquidation.