Evergrande’s liquidators have filed court documents seeking to void a HK$1 billion (US$127.6 million) shareholder compensation agreement made between Hong Kong’s Securities and Futures Commission (SFC) and PwC Hong Kong [1]. The fund was part of a settlement reached in April to resolve investigations into PwC Hong Kong’s auditing work for Evergrande, alongside a HK$300 million fine levied by Hong Kong’s Accounting and Financial Reporting Council [1, 2].
The liquidators argue that the SFC lacked the statutory authority to settle a market misconduct claim against PwC Hong Kong—an entity not regulated by the SFC—without involving the courts [1, 2]. They contend the deal is unlawful, void, and invalid because the SFC bypassed judicial oversight.
They also say the settlement improperly prioritizes shareholder compensation over creditor claims. Under Hong Kong insolvency law, creditors must be paid before shareholders. Evergrande’s liabilities far exceed its assets, with an estimated debt load of HK$350 billion, making payouts to shareholders unlikely [1, 2].
The liquidators are pursuing a separate lawsuit seeking 57 billion yuan (about RM34.3 billion or S$10.8 billion) in damages from PricewaterhouseCoopers International and its affiliates in mainland China and Hong Kong [1, 2].
Legal experts agree that the SFC must go through courts to grant compensation orders. Jimmy Chan, a Hong Kong-based partner at Jingtian & Gongcheng, said, "The SFC’s direct settlement avoided judicial oversight and misapplied its powers" [1].
The initial settlement between the SFC and PwC Hong Kong, which included the HK$1 billion compensation fund and the HK$300 million fine by the Accounting and Financial Reporting Council, was announced in April 2023 [1, 2]. The liquidators filed their court challenge on June 16, 2023 [1].
