Liquidators for China Evergrande have filed a lawsuit challenging the Hong Kong Securities and Futures Commission’s approval of a minority shareholder compensation fund [1].
The legal battle highlights the complex struggle to distribute remaining assets from one of the world's most indebted property developers. If the court finds the fund invalid, it could significantly alter how remaining capital is allocated among various creditors and investors.
In the filing submitted to the Hong Kong High Court, the liquidators said that the watchdog approved the compensation fund without proper authority [1]. They said that the current structure of the fund potentially breaches the rights of shareholders [2].
The liquidators are seeking to have the court declare the fund invalid, saying that the regulator overstepped its legal mandate in sanctioning the payouts [1]. The hearing for this challenge is scheduled for this month [2].
This legal action is part of a broader effort by the liquidators to recover funds from various parties involved with the failed developer. In a separate lawsuit in Hong Kong, the liquidators are seeking 57 billion yuan, approximately $8.4 billion, from the accounting firm PwC [3].
Evergrande's collapse has left a trail of unpaid debts and unfinished projects across China. The liquidators now face the task of managing these liabilities while navigating the regulatory environment of Hong Kong [1].
“Liquidators argue the fund is legally invalid.”
This challenge represents a strategic move by liquidators to maximize the pool of assets available for all creditors by blocking specific, regulator-approved payouts. By contesting the authority of the Securities and Futures Commission, the liquidators are testing the boundaries of regulatory power in Hong Kong's insolvency proceedings, which could set a precedent for future corporate collapses in the region.
