DLA Piper advises Evergrande Services Independent Investigation Committee on successful resumption of HKEX trading
DLA Piper has advised the Independent Investigation Committee (the Committee) of Hong Kong Stock Exchange listed company Evergrande Property Services Group Limited (Evergrande Services) on its successful journey to resume trading after a 16-month suspension.
The suspension came into effect on 21 March 2022 after Evergrande Services was unable to publish its financial results on time and banks seized RMB13.4 billion in deposits that had been pledged as security for third party guarantees. As a result, the Committee was formed to investigate the matter and was responsible for making a proposal to the Board with regards to the possible remedial actions.
Evergrande Services experienced financial difficulties after its parent company China Evergrande Group became embroiled in a major debt crisis in mid-2021. The company resumed trading on 3 August 2023, following the release of its financial results and the end of the investigation into misused funds involving China Evergrande Group.
After the investigation, Evergrande Services confirmed it has sufficient assets for its business operations and is expected to maintain a level of revenue and net profit growth comparable to that of property service industry leaders. It has also carried out remedial measures such as internal control reviews and staff training regarding seized deposits used as collateral for pledge guarantees by China Evergrande Group.
Evergrande Services has also put in place sufficient measures to prevent similar incidents in the future, adding that all directors involved in the pledge guarantee had resigned. Additionally, it is actively taking various actions to recover its losses, including a negotiation with China Evergrande Group on a repayment proposal, as well as considering the feasibility of litigation.
The DLA Piper team was led by partner Stephen Wong, with assistance from senior associate Kenneth Leung, associate Kelsey Wong and trainee solicitor Angela Ip, all members of the Litigation and Regulatory practice based in Hong Kong.
Commenting on the matter, Stephen said “We were pleased to assist the Committee in this matter and are thrilled Evergrande Services has resumed trading. This is a high profile and challenging case, and the team and I have worked tirelessly since the trading suspension to ensure the best possible outcome for our client.”