Text: Deng Haozhi.
It lasted nearly eighteen monthsThe recent outcome of the China Evergrande Winding-up Petition Hearing was the largest developer winding-up case in Hong Kong's history, with the High Court ordering the winding-up.
Winding-up is a legal proceeding, and in many cases of winding-up, creditors apply to the court for compulsory winding-up of the company when the company is facing financial difficulties and is unable to repay its debts. If the winding-up is approved by the court, the court will appoint a liquidator to be responsible for the entire winding-up process. The liquidator will take over the operations of the company, as well as its assets. If there is cash, it will be divided first, and the assets will be sold. The proceeds are first used to pay the costs of the winding-up petition and the liquidator's fees. The remainder is then distributed to the preferential creditors in order, such as tax arrears, employees' salaries, etc.; This is followed by repayment of secured creditors and finally unsecured creditors, including suppliers, bondholders, and shareholders of the company. When all the procedures are completed, the liquidator can "retire" and apply to the court for dismissal.
In the past, winding-up cases often lasted for several years after multiple rounds of creditors' meetings. Some professionals estimate that since many of Evergrande's assets are not in Hong Kong, but in Chinese mainland, the complexity is very high, and the whole process is likely to take more than five years. Professionals said: In the Evergrande liquidation case, the identification of assets itself is already an extremely complex issue, especially involving many domestic project companies, many real estate projects are still under construction, how can the liquidator control the enterprise, how to identify? It's difficult. In addition, the corresponding places of real estate in various places also have different considerations, such as the issue of guaranteed delivery, employee wages and so on. Even if the money realized from the liquidation is repatriated to Hong Kong, it is very difficult to deal with cross-border bankruptcy cases, especially in the Mainland. ”
Three years ago, Hong Kong and the Mainland signed a co-operation mechanism whereby Shanghai, Shenzhen and Xiamen would enforce Hong Kong's winding-up orders. There have been cases in which the company's assets were successfully recovered in Shenzhen, but will Evergrande be "cross-border liquidation"? Some professionals have pointed out that liquidators may seek assistance from the courts of Chinese mainland in accordance with the procedures.
Some experts who are familiar with the winding-up procedure believe that it is difficult to enforce a winding-up order in the mainland by a Hong Kong court, and Evergrande's mainland project will not be affected. According to ** reports, Evergrande has 1.62 million units ** in Chinese mainland that are unfinished, and an estimated 6 million home buyers are affected. According to Evergrande's domestic real estate development model, each real estate will be installed under an independent project company, which is wholly owned by Evergrande. At present, the parent company of Evergrande is liquidated, and the project company can still operate without its independent subsidiary. Theoretically, the money (of the owner) is in the supervision account of the project, and the bank will pay the construction payment of the corresponding project according to the progress of the project company, which has a certain guarantee effect on the buyer.
There are also experts who believe that ** will deal with it if necessary. For example, through the method of state-owned enterprise investment, there may be a 'central prefix' or local state-owned enterprises to help complete the delivery of housing. If Evergrande can't have enough funds to deliver the building in the end, it is very likely that it will be acquired in a unified manner and the housing construction project will be acquired. It is not ruled out that it will become affordable housing.