China Evergrande unit starts legal proceedings against parent

Evergrande Property Services said on Friday (Jan 26) its units have started legal proceedings against parent China Evergrande to recover 11.4 billion yuan (US$1.59 billion) of pledge guarantees on deposit certificates.

The lawsuits, which also name China Evergrande's other units including Hengda Real Estate, come ahead of a high-profile case on Monday where a judge will decide whether to liquidate the embattled Chinese property developer.

In late November, Jinbi Property Management, another unit of Evergrande Property Services, also commenced proceedings for the recovery of about 2 billion yuan deposit certificate pledge guarantees.

In February last year, parent Evergrande said it was in talks with Evergrande Property Services to repay the funds.

In July 2022, Evergrande revealed that deposits of about 13.4 billion yuan belonging to the property unit were used as collateral for pledge guarantees by the group.

Evergrande Property Services has received notices from the Guangzhou Intermediate People's Court of Guangdong province formally accepting the filing of the cases, it said on Friday.

In a separate statement, Evergrande Property Services said its units have received tax notices for not providing supporting documents recognising bad debt losses and tax deductions for deposits worth 13.4 billion yuan from 2021 to 2023.

Evergrande Property Services said there was a risk that corporate income tax was underpaid by about 650 million yuan for 2021 and 2022, along with related late payment fees, and it may have to rectify the tax filing.

However, the profit and loss statements for 2021 and 2022 already fully reflected the tax payable, Evergrande Property Services said.