(Yicai Global) Dec. 21 -- Kangmei Pharmaceutical has started shelling out the CNY2.5 billion (USD392 million) in damages that the Chinese drugmaker was ordered to pay to investors last month in the country’s first ruling on a securities fraud class action lawsuit.

Kangmei began to repay investors yesterday, Xinhua News Agency reported. Those whose losses are under CNY500,000 (USD78,435) will be compensated in cash. Those who lost more than this will be reimbursed in cash, dept-equity swaps and trust holdings.

The company is also undergoing reorganization, the report said. Guangdong Shennong Agriculture Development is preparing to invest CNY5.4 billion (USD847 million) in the Jieyang, southern Guangdong province-based firm for a majority stake of 25.3 percent equity. The reorganization is expected to be completed by the end of the year.

Kangmei Pharma infringed around 50,000 investors’ rights and interests by making false statements and must pay CNY2.5 billion (USD392 million) in damages, the Guangzhou Intermediate Court said on Nov. 12.

The drugmaker was found guilty last year of inflating its business revenue by CNY29.1 billion (USD4.5 billion) and its cash holdings by CNY88.6 billion between 2016 and 2018. It also issued its main shareholder with CNY11.6 billion in unauthorized funds.

The company became the subject of the country’s first securities fraud class action, or special representative, lawsuit last year as part of China’s ‘zero tolerance’ policy on capital market crimes. They provide a convenient and low-cost channel for investors to participate directly in litigation rather than through representative organizations.

Kangmei Pharma’s share price [SHA:600518] was trading down 5.11 percent at CNY3.34 (USD0.52) as of 1 p.m. China time today.

Editor: Kim Taylor