This article is from the Australian Property Journal archive
CHINA Evergrande, the world’s most indebted property developer and under liquidation, is taking legal action against its founder and former executives, in a bid to recover US$ 6 billion.
Evergrande was placed into liquidation in January this year and this week, its liquidators announced that it has commenced legal action in Hong Kong’s High Court against founder Hui Ka Yan and his wife Ding Yumei, and three companies they control, as well as Xia Haijun (former chief executive officer) and Pan Darong (former chief financial officer).
Liquidators are seeking to recover from the seven defendants approximately US$ 6 billion paid by Evergrande on the basis of allegedly misstated financial statements of the company for each of the financial years ended 31 December 2017 to 31 December 2020.
The liquidators have obtained injunctions restraining each of Hui, Ding and Xia from dealing with, disposing of, or diminishing the value of, their worldwide assets.
The Court has granted the injunctions.
The liquidators did not comment further on the matter as the legal matter is before the court.
However they said there is no certainty as to whether or not they will be successful and as to the amount that may ultimately be recovered by the company.
Although the US$ 6 billion liquidators are seeking to recover is a significant amount, it is a drop in the ocean in the grand total of US$ 300 billion that creditors are owed.
Evergrande went into liquidation at the start of this year after it failed to negotiate a restructuring deal with creditors.
Evergrande first defaulted in 2021, a year after Beijing introduced the “three red lines” measures that were designed to crimp developers’ borrowing and halt a growing property bubble. The company’s liabilities have since skyrocketed, to a reported range of A$455 billion and $498 billion. It lost A$118 billion over 2021 and 2022 and filed for bankruptcy in the United States last year.
Evergrande’s billionaire founder and chairman Hui Ya Kan was detained by Chinese police and put under surveillance last year, while there were allegations that he attempted to assets offshore while the company struggled to finish projects.
In March this year, the founder was penalised $6.5 million for overstating Evergrande’s revenue by $78 billion.
Furthermore, Chinese authorities took the additional steps to ban from Hui from running a company in China, for life.
