An Ontario court has certified a proposed shareholder class action in order to allow $10 million in proposed settlements with the company, its directors, and auditors, to go ahead.

Earlier this week, Ontario’s Superior Court of Justice granted motions from the plaintiffs in a proposed class action brought by Jerry Zaniewicz and Edward Clarke against Zungui Haixi Corp., certain officers and directors, its auditors (Ernst & Young LLP) and the underwriters of its initial public offering (CIBC World Markets Inc., Canaccord Genuity Corp., GMP Securities LP, and Mackie Research Capital Corp.) on behalf of shareholders alleging that its IPO prospectus and other disclosure documents contained representations that were untrue. The allegations have not been proven.

The decision notes that Zaniewicz and Clarke have reached settlements that cover all of the defendants except for the brokerage firms that belong to the underwriting syndicate. They were seeking to certify the action for settlement purposes; and the motions were not opposed.

Under the first settlement, the litigation receiver of Zungui and its directors have reached an agreement that will see them pay $8.0 million to the proposed class of shareholders, and provide pre-discovery production in the ongoing prosecution of the action, in exchange for a full and final release. The second settlement will see Ernst & Young and the Zungui settling defendants pay a further $2.0 million (and provide pre-discovery production) for a full release for the audit firm too.

The decision notes that when certification is sought for the purposes of settlement, all the criteria for certifying a class action must still be met. In this case, “Having reviewed the motion record, I am satisfied that all of the criteria for certification… have been satisfied. I grant certification and the related relief requested,” it says.

A proposed notice to shareholders indicates that a hearing to approve the settlements has been set for August 26 in Toronto. If the settlements are approved by the court, a notice will be published to explain how class members can make a claim for compensation from the settlements.