In the latest development of Foshan Electrical and Lighting Co., Ltd. (Foshan Lighting) investor lawsuit, the company has contested jurisdiction causing a six months postponement of the court hearing. In late Sept. this year, 515 investors filed compensation lawsuits against the company due to misrepresentation of company finances. The case’s first court hearing was scheduled for Oct. 22, 2013 at Guangzhou Intermediate People’s Court, China.

Foshan Lighting’s objection to jurisdiction is almost 100 percent certain to be overruled by the court, said Xiujiao Lee, a lawyer from Everwin Law Office in Guangdong Province. “ Civil court cases involving compensation for stock misrepresentation and failure to disclose information are in the jurisdiction of the local government's People’s Intermediate Courts in provinces, cities, autonomous regions, designated cities, and special economic zones,” according to China’s Supreme People’s Court judicial interpretation in 2003. In other words, the local Foshan government where the company is based will have no jurisdiction over the case. Guangzhou’s Intermediate People’s Court takeover in this case is completely legal.

Then why is Foshan Lighting playing the “contend jurisdiction” card? Several senior stock analysts believe the company is trying to: 1. Prevent the escalation of compensation. 2. Alleviate impact of compensations on stock prices. It is estimated Foshan Lighting compensation bill might total RMB 200 million (US$ 32.86 million), and will have a drastic effect on the company operations.