Mainland courts confirm jurisdiction over securities fraud claims against an offshore-incorporated listed company

However, the Beijing Financial Court held that:

• although the ListCo’s alleged misconduct occurred before the 2019 Amendment came into force, the investor’s loss did not crystallise until the ListCo was delisted in January 2021. The harm therefore continued after the 2019 Amendment came into force and the extraterritorial provision could apply; and
• the two statutory triggers for extraterritorial application, namely (i) disruption of the PRC domestic market order and (ii) harm to the lawful rights and interests of domestic investors, are alternative rather than cumulative requirements. The satisfaction of either condition is sufficient for the provision to apply.

The Beijing Financial Court’s jurisdictional ruling was subsequently upheld on appeal by the Beijing High People's Court. The case was later highlighted in the Supreme People's Court's 2026 Work Report, underscoring the significance of the decision and its potential influence on future cases.

The dispute was ultimately resolved through court-facilitated mediation, with the ListCo having reportedly fulfilled its settlement obligations within approximately two years of the claim being filed. The settlement terms remain confidential.

Key Takeaways

• Offshore incorporation and listing do not operate as a shield from PRC jurisdiction: The decision confirms that PRC courts may, in appropriate circumstances, exercise extraterritorial jurisdiction over securities claims involving offshore-incorporated and listed issuers where securities offerings or transactions in relation to securities outside Mainland China cause harm to Mainland investors. Hong Kong-listed companies or other overseas-listed companies with substantial Mainland operations or investor bases should therefore consider whether their governance and compliance frameworks adequately address potential exposure under PRC law.
• Listing Rules breaches may carry consequences under PRC law: In this case, the PRC courts were prepared to treat alleged Listing Rules breaches as capable of founding a securities fraud claim under the PRC Securities Law. The decision therefore raises the possibility that certain Listing Rules compliance failures may give rise to PRC law liability where Mainland investors suffer loss. That said, as the case was ultimately settled without any judicial determination on liability, it remains to be seen whether a mere breach of the Listing Rules would, without more, be sufficient to establish liability under the PRC Securities Law. This is likely to depend on the nature of the underlying conduct and whether it results in disruption of the PRC domestic market order or harm to the lawful rights and interests of domestic investors.
• Broader regulatory trend: The decision is consistent with the continued development of the PRC’s cross-border securities regulatory framework, particularly in relation to companies with substantial Mainland connections, even where the company is incorporated, listed and financed offshore. For example, in 2023, the China Securities Regulatory Commission (CSRC) introduced a filing regime requiring Mainland-based companies (including offshore-incorporated companies with principal operations in the Mainland) to file with the CSRC before pursuing direct or indirect overseas listings and securities offerings. Against this backdrop, companies with substantial Mainland operations should expect continued PRC regulatory and judicial scrutiny in connection with their cross-border securities activities.