Listed firms weak on disclosure, IP rights protection

In more than 1,800 listings in the A-share market, only 20 listed companies were considered having good legal risk control, according to the 2010 Legal Risk Management Forum for China Listed Companies held Thursday in Beijing.

The companies have problems with information disclosure and intellectual property rights, said Chen Xiaofeng, director of Corporate Legal Risk Management Committee with the Beijing Lawyers Association.

In China, there are more than 2,000 major brands, but only 159 listed companies had registered trademarks. The litigation in intellectual property rights cases involved value as high as 50 billion yuan ($7.28 billion) in 2009, up 142 percent year-on-year, Chen said.

Experts from Peking University Law School, the China Law Society, and Beijing Wisway Law Firm evaluated the firms.

Cases of corporate fraud have been rampant here and abroad over the last few years, and the issuers of the report hope for more transparency can prevent major crises from erupting.

A 300 billion yuan ($44.25 billion) procurement agreement with a subsidiary of China Railway Construction Materials Group turned out to be fraudulent last week.

The US Securities and Exchange Commission charged Goldman Sachs in April fraud and failure of disclosure leading to huge losses of its investors on subprime residential mortgage-backed securities.

Scandals involving lack of disclosure have racked dozens of companies from home appliance producer Sichuan Changhong to high-tech Aisino Corp this year.

The legal risks are becoming increasingly important with the rising number of individual investors, and millions of investors' rights risk being infringed upon if the listed companies fail to fulfill their responsibilities, said Xi Xiaoming, vice president of Commercial Law Society.

By the end of May, the listed companies numbered 1,863 with market capitalization of 21 trillion yuan ($3.1 trillion), or 62.5 percent of China's GDP 2009.

Roughly 70 million people have stock accounts on the Shanghai and Shenzhen bourses.

Source: Global Times