City law firm Pinsent Masons and broker Daniel Stewart & Co have been hit with a lawsuit alleging negligence over their work on the London listing of a Chinese company in 2012.
The £180m claim centres on the work the pair undertookon the float of Chinese sportswear maker Naibu Global International.
Naibu floated on Londons junior alternative investment market (Aim) in 2012 raising £6m in a £68m listing.
The companys shares were suspended in 2015 after its chairman and founder Lin Huoyan and its vice-president of production Lin Congdeng disappeared.
Naibus non-executive directors are pursuing litigation in China to wrest control of the company from its former bosses who they have been unable to contact because their whereabouts are unknown.
Yesterday Naibus lawyers served Pinsents and Daniel Stewart with proceedings alleging they failed to do proper due diligence on the company before it went to market in 2012.
Ian Baker, a partner at law firm PGB Gitlin Baker who is bringing the claim, said:
“This case is at the vanguard of what is basically a scandal of the numerous failed Chinese related floats on Aim; there appears to have been a rush to float some of these companies at the expense of proper due diligence. There are clearly question marks about the suitability of a sizeable proportion of these companies ever having come to the market”.
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The claim is being backed by “one of the largest litigation funders in the City”, according toBaker.
A spokesperson for Pinsents said: “We are extremely disappointed that proceedings have been commenced and will be defending these strenuously.”
Naibu's non-executive directors Giles Elliott, David Thomas and Stephen Cheung have appointed Chinese law firm Fangda to help them take control of the company by removing Lin and his colleagues from the board.
This process has been slow as they do not know where Lin is and are unable to serve him with proceedings.
Broker Daniel Stewart was removed from AIM in 2016 after its nominated adviser (nomad) resigned. It lost its licence to act as a nomad in December 2014.
It previously acted as financial adviser for Scottish football club Rangers which also de-listed from Aim in 2015 after its nomad resigned.
The company was backed by Rob Terry, the founder of troubled insurance software group Quindell, which later rebranded as Watchstone.
Daniel Stewart & Co declined to comment.