Chinese court accepts Evergrande liquidation petition 1 day after founder’s life sentence

A Guangdong provincial court in southern China formally accepted a bankruptcy liquidation petition against China Evergrande Group's main onshore unit, Hengda Real Estate, on Friday, marking the conclusion of the company's unraveling. The Guangzhou Intermediate People's Court cited Hengda's insolvency to force the unit into liquidation, highlighting the business's failure to pay mature debts and possess insufficient total assets.

This decision occurred just a day after the Shenzhen Intermediate People's Court sentenced Evergrande's founder, Hui Ka-yan, also known as Xu Jiayin, to a life sentence for financial fraud and mismanagement. Hui was fined 8.82 billion yuan by the Shenzhen court and 7 billion yuan by Evergrande Real Estate, with instructions to recover any remaining illegal gains.

Evergrande, once a symbol of China's debt-driven property boom, spiraled into crisis in 2021 due to regulatory limits on overleveraged developers. The company's default on over $300 billion in liabilities caused global shockwaves, leading to a property downturn, protests from homebuyers over unfinished flats, and a Hong Kong liquidation order against its offshore holding company in early 2024.

The liquidation filing aligns with wider structural changes to China's insolvency framework, with Beijing's top legislative body considering revisions to the Enterprise Bankruptcy Law. These proposed amendments, to be read in full from August 25 to 28, aim to improve temporary protection for restructuring procedures, clarify creditor and debtor filing criteria, and enforce stringent information disclosure standards during corporate reorganizations, as well as clarify jurisdiction over international insolvency cases.