Before one melon is settled, another melon arises. Will Zhan Ketuan's unwillingness bring trouble to Bitmain?

Original Bob

There have been quite a lot of "melons" recently. If you are not interested in entertainment melons that have nothing to do with you, then you will definitely be interested in financial melons, because such events are likely to have an impact on the companies involved and related projects.

Look, Li Guoqing’s recent “counterattack after being kicked out” has not yet been over. After being “kicked out” of Bitmain, Zhan Ketuan was still unwilling to give up and never gave up the opportunity to “counterattack”. This indirectly shows that Dangdang and Bitmain are indeed quite profitable. What we need to understand is whether Zhan Ketuan’s “sabotage actions” will have a significant impact on the normal operation of Bitmain’s domestic and overseas businesses?

01 The whole story

Everyone should be aware of the internal disputes in Bitmain in October 2019. Wu Jihan returned to the company with the support of the majority, and Zhan Ketuan was relieved of all his duties and resigned as the legal representative of related subsidiaries. Although Bitmain's revenue exceeded US$300 million from January to April 2020 and its AI business grew rapidly, indicating that Wu Jihan's return put Bitmain back on track, things did not end there.

1. Zhan Ketuan’s application for pre-litigation freezing and Bitmain’s application for jurisdictional objection

In December 2019, Zhan Ketuan applied to the People's Court of Changle District, Fujian Province to freeze Bitmain's equity and other investment rights in its wholly-owned subsidiary Zhanhua Intelligent Technology worth RMB 3.6 million from December 16, 2019 to December 16, 2021. Subsequently, Zhanhua Intelligent Technology and Bitmain submitted an objection to jurisdiction to the court, intending to apply for the case to be heard by the Fuzhou Intermediate People's Court to eliminate possible interference.

On April 26, 2020, the Intermediate People's Court of Fuzhou City, Fujian Province, issued a ruling (No. 2020 Min 01 Min Jurisdiction Final 74) on the China Judgment Documents Network, dismissing the appeals of Fujian Zhanhua Intelligent Technology and Bitmain and upholding the original ruling. After review, the Intermediate People's Court of Fuzhou City, Fujian Province believes that this case is a jurisdiction dispute caused by a shareholder qualification confirmation dispute, and the original court, namely the Changle District People's Court, has jurisdiction over this case in accordance with the law. Note that this dismissal is only a procedural jurisdiction ruling, that is, the Intermediate People's Court of Fuzhou City finally ruled that the case should be heard by the Changle District People's Court of Fuzhou City. The shareholder qualification confirmation case between Zhan Ketuan and Zhanhua Intelligent Technology has not yet been heard, let alone the final judgment.

2. Zhan Ketuan filed an administrative reconsideration to revoke the change of legal person

On February 12, 2020, Zhan Ketuan filed an administrative reconsideration with the Haidian District Justice Bureau of Beijing, requesting the revocation of the change of legal representative of Beijing Bit on January 2, 2020 and the restoration of him as the legal representative.

On April 28, 2020, the Beijing Haidian District Justice Bureau made a reconsideration decision to revoke the Beijing Haidian District Market Supervision Bureau's decision made on January 2, 2020 to approve the change of registration of the legal representative of Beijing Bit, but did not decide to restore Zhan Ketuan as the legal representative.

02 Influence Geometry

In the above-mentioned incident, there are two points of concern. One is that the jurisdictional objection application submitted by Bitmain was rejected, and the other is that part of the administrative reconsideration claims filed by Zhan Ketuan were supported by the Haidian District Justice Bureau of Beijing.

Many people thought the case was settled after seeing the ruling that Bitmain's appeal was rejected. In fact, as mentioned earlier, this rejection was only a procedural jurisdiction ruling, and the shareholder qualification confirmation case between Zhan Ketuan and Zhanhua Intelligent Technology has not yet been heard. Subsequently, Bitmain responded that the impact was not significant, Zhanhua Intelligent Technology was only one of Bitmain's many subsidiaries at home and abroad, and the outcome of the case would not have any impact on Bitmain's normal production and operation, nor would it affect Bitmain's absolute controlling stake in Zhanhua Intelligent Technology.

In response to the "reconsideration decision" made by the Beijing Haidian District Justice Bureau, Bitmain issued an official statement, stating that the decision would not affect the fact that Zhan Ketuan is no longer the legal representative of Beijing Bitmain. Specifically:

In summary, the official statement of Bitmain reminds us that Beijing Bit is only one of Bitmain’s dozens of subsidiaries at home and abroad. Even if Zhan Ketuan is mistakenly registered as the legal representative of Beijing Bit, it will not have a significant impact on Bitmain’s normal operations at home and abroad.

Bitmain said it would resolutely file an administrative lawsuit to safeguard its legitimate rights and interests.

Here’s more information we know so far:

1. The only shareholder of Beijing Bit is Hong Kong Bit, and the executive director and authorized representative of Hong Kong Bit are both Wu Jihan. The shareholder of Hong Kong Bit is the Cayman company, and Zhan Ketuan no longer enjoys 10 times voting rights in the Cayman company. He only indirectly holds about 36% of the shares of the Cayman company and has been removed from the board of directors of the Cayman company.

2. In the two registration changes of legal representatives, Beijing Bit made pre-applications in the unified "registration system" of the Beijing Municipal Market Supervision Bureau, and prepared paper application materials based on the relevant documents and templates generated by the system. It always strictly abided by the regulations of the market supervision department, and the materials were complete and in compliance with the legal form.

3. The selection of the legal representative of a company plays a very important role in the survival and development direction of the company. Therefore, my country's Company Law and other relevant laws stipulate that shareholders have the right to replace the legal representative of the company to ensure that the will of the shareholders can be realized and the normal operation and orderly development of the company can be ensured. It should be emphasized that the final right to appoint and remove the legal representative of Bitmain belongs to the shareholders, not any administrative agency or individual.

03 Summary

Bitmain officials seem to have made sufficient preparations for Zhan Ketuan's unwillingness and "counterattack". From its official statement and relevant responses to the incident, generally speaking, whether it is the rejection of the jurisdictional objection or the administrative reconsideration decision, it has little impact on Bitmain's normal operations at home and abroad. From the information we have at present, from a legal point of view, the fact that Zhan Ketuan's party has been "out" is relatively clear. We will wait and see what happens next.

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