The liquidators of failed property developer China Evergrande have launched an effort in a Hong Kong court to recover $6bn from its founder Hui Ka Yan and other top company executives.
The legal proceedings, detailed in a filing to Hong Kong’s stock exchange late on Monday, mark the first public effort by the liquidators to recover assets from Hui since a judge ordered the winding up of Evergrande’s locally listed entity in January.
They could cast a light on Hui’s global assets and the degree to which they might be exposed to court decisions outside the Chinese mainland.
Edward Middleton and Tiffany Wong of restructuring firm Alvarez & Marsal, who were appointed acting as liquidators of the company, made the filing on its behalf on Monday.
They said the proceedings at Hong Kong’s high court aimed to “recover” funds including “dividends and remuneration” worth a total of about $6bn from Hui, former Evergrande chief executive Xia Haijun, former chief financial officer Pan Darong, and four other individuals and entities.
The claim was based on allegedly “misstated” financial statements made by the Hong Kong-listed company for the financial years 2017 to 2020, it said.
The legal proceedings began in March but were previously under confidentiality orders lifted this month, the filing said. It added the proceedings were ongoing and there was no certainty any of the money could be recovered.
Many of Hui’s assets in Hong Kong, including three luxury mansions linked to him, have already been seized or sold, while most of Evergrande’s assets are held in mainland China.
Monday’s filing was the latest twist in a prolonged corporate collapse characterised by a lack of transparency for the international investors who ploughed about $20bn into Evergrande before its failure.
The developer, which with more than $300bn in liabilities was the world’s most indebted, came to embody the excesses of China’s property industry when it defaulted in late 2021, sparking a crisis that continues to weigh on the wider economy.
The China Securities Regulatory Commission said in March that Hui and Evergrande’s mainland business had inflated revenues by $78bn over 2019 and 2020. It fined Hui more than $6mn and Evergrande’s mainland business nearly $580mn.
But lawyers have said that the Hong Kong court-appointed liquidators are likely to find it difficult to recover significant assets from the mainland.
Evergrande’s liquidators also obtained injunctions restraining Hui, Xia and Hui’s “spouse or former spouse” Ding Yumei from dealing with, disposing of or diminishing the value of their global assets “up to various prescribed limits”, the stock exchange filing said.
The Financial Times reported in February that Evergrande’s liquidators were preparing to pursue a potential lawsuit against PwC, the company’s auditor since 2009, that could lead to the auditing firm facing a high-profile negligence claim.
Court findings against Hui and others resulting from the latest proceedings might “also help support” the potential claim against PwC, said one senior restructuring and insolvency lawyer in Hong Kong.
Evergrande’s electric vehicle unit announced on Monday that a court in mainland China had last week approved bankruptcy proceedings against two of its subsidiaries based in the southern province of Guangdong.
Additional reporting by Thomas Hale in Shanghai and George Russell in Hong Kong
