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SFC Reaches Agreement with PwC for Shareholder Compensation of $1B Regarding China Evergrande's False Financial Statements
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The Securities and Futures Commission (SFC) announced that it has reached an agreement with PricewaterhouseCoopers Hong Kong (PwC HK), under which PwC HK has agreed to set aside $1 billion to compensate eligible independent minority shareholders of China Evergrande. The SFC and PwC HK have agreed that the matter will be fully and finally resolved without admission of liability, and that the SFC will take no further action against PwC HK, provided that PwC HK fulfils the terms of the agreement. PwC HK audited China Evergrande's financial statements for the fiscal years ended 31 December 2019 and 31 December 2020. The SFC also examined the role of PwC HK and concluded that there was market misconduct due to China Evergrande's dissemination of false and misleading financial information and serious breaches of auditors' professional duties. The SFC concluded that China Evergrande's audited annual revenue was overstated by RMB213.9 billion or by 44.79% for FY2019 and RMB350.2 billion or by 69.03% for FY2020. Consequently, the company's audited annual profit of RMB33.5 billion and RMB31.4 billion for FY2019 and FY2020, respectively, should have been a loss of RMB7.12 billion and RMB19.9 billion, respectively. With the ultimate objective of securing compensation for shareholders, the SFC has determined that the best interests of China Evergrande's independent minority shareholders are served by reaching an agreement with PwC HK, under which H$1 billion has been set aside for allocation to compensate these independent minority shareholders through a process overseen by an independent administrator. The detailed provisions of the compensation process will be published in due course. In the meantime, China Evergrande's independent minority shareholders and their intermediaries are reminded to retain records of transactions involving the company’s shares, for the purpose of making claims for compensation. Intermediaries are also reminded to provide reasonable assistance to such shareholders to file their claims. Auto-translated by AI AASTOCKS Financial News |
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