Evergrande liquidators challenge Hong Kong watchdog in court

Hong Kong's Securities and Futures Commission (SFC) has sparked legal controversy by striking a HK$1 billion (S$163 million) settlement deal with PricewaterhouseCoopers' Hong Kong affiliate, aimed at compensating minority shareholders of China Evergrande. The agreement, reached in April, resolved the matter without requiring PwC HK to admit liability, according to the SFC.

During a hearing on August 19, lawyers representing PwC and Evergrande's liquidators challenged the legitimacy of the deal. The liquidators argued that the SFC's decision lacked proper statutory authority, contending that responsibility for such settlements should lie with Hong Kong's accounting watchdog. They sought to have the SFC's decisions, including the fund, declared "unlawful, void and/or invalid."

The liquidators pointed out that the agreement prioritizes shareholders over creditors, as shareholders are paid last in liquidation cases and only if there is any surplus after all creditors are satisfied. This claim is significant, as Evergrande's liabilities are estimated to exceed its assets, at approximately HK$350 billion.

The case highlights the battle over seniority in winding-up cases, with Evergrande liquidators seeking to have the SFC's decision declared invalid. Meanwhile, PwC faces significant financial and regulatory pressure due to its audits of Evergrande. The firm's mainland China affiliate was previously fined for its role in auditing the Chinese developer.

Evergrande's liquidators have launched a lawsuit against PwC's international and Hong Kong affiliates, seeking compensation of 57 billion yuan. Some PwC partners are also looking into ways to protect their personal assets as the firm grapples with escalating legal and regulatory challenges.