Evergrande, China's indebted real estate giant, seeks to recover USD 6 billion from its founder and others for misrepresented finances between 2017-2020. The company, defaulted in 2021, is now involved in legal proceedings, aiming to reclaim dividends and remuneration. Founder Xu Jiayin, reportedly under house arrest, and others face asset injunctions. Evergrande's financial troubles have significantly impacted China's real estate market, contributing to economic slowdown. The recovery efforts are crucial for stabilizing Evergrande's finances and could set a precedent for the sector. Trading in Evergrande's shares remains suspended amid ongoing legal challenges.
China's heavily indebted real estate giant, Evergrande, announced on Monday that it, along with its liquidators, is attempting to recover about USD 6 billion in dividends and remuneration from seven individuals or entities, including its founder. Evergrande, once China's largest real estate firm, played a significant role in the country's rapid economic growth over recent decades. However, its spiralling debt has become a symbol of the ongoing crisis in the real estate sector. The company defaulted in 2021 after years of struggling to repay its creditors.
Evergrande is seeking to recover "among other things, dividends and remuneration in an aggregate amount of approximately USD 6 billion paid by the Company," as stated in a release on the Hong Kong Stock Exchange, where it is listed. This amount is being claimed for damages caused by alleged misrepresentations of the group's financial position between 2017 and 2020.
The defendants named in the case include company founder Xu Jiayin (also known as Hui Ka Yan), his spouse or former spouse Ding Yumei, former chief executive Xia Haijun, and former chief financial officer Pan Darong. Additionally, three other entities associated with Xu and Ding were mentioned. Xu is reportedly under house arrest, though Evergrande has not confirmed or denied these reports. Chinese regulators announced in March that Xu would be banned from the securities market for life due to financial fraud.
Injunctions have been obtained by the liquidators to prevent Xu, Ding, and Xia from "dealing with, disposing of, or diminishing the value of, their worldwide assets up to various prescribed limits," according to the company's statement issued on Monday.
Trading in Evergrande's shares has been suspended since January and "will remain suspended until further notice," the statement added. A Hong Kong court ordered the liquidation of the firm in January. The ongoing legal proceedings offer no certainty regarding their success or the amount that may ultimately be recovered, as noted in the company's statement.
Evergrande's financial troubles have had a significant impact on China's real estate market, contributing to a broader economic slowdown. The company's inability to manage its debt has led to widespread concerns about the stability of the sector and its potential ripple effects on the global economy. As one of the largest property developers in the world, Evergrande's crisis is a stark reminder of the risks associated with rapid expansion and high leverage.
The company's efforts to recover funds are part of a broader strategy to stabilise its financial situation and regain some control over its extensive debt. The outcome of these legal proceedings will be closely watched by investors and industry observers, as it may set a precedent for other indebted firms in the sector.
As Evergrande navigates this challenging period, the real estate market in China continues to face significant headwinds. The government has implemented measures to cool the overheated market and reduce financial risks, but the effectiveness of these policies remains to be seen. The resolution of Evergrande's issues will be a critical factor in determining the future trajectory of the sector.
In conclusion, Evergrande's efforts to recover USD 6 billion in dividends and remuneration are a key part of its strategy to manage its debt crisis. The legal proceedings will play a crucial role in the company's attempt to stabilise its finances and the broader implications for China's real estate market and the global economy.
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