DeHeng Acts as Co-Administrator of Tongze Real Estate Company
2018-8-28
On August 20, 2018, the People's Court of Jiangyou City ruled to accept the consolidation case of Sichuan Tongze Real Estate Co., Ltd. ("Tongze") according to the application of creditor Yang Haojin and the Decision of the People's Court of Jiangyou City of Sichuan Province ([2018] S0781P No.2), which designated DeHeng and Shuxing Law Offices as the administrator of Tongze for the consolidation of the Sandalwood real estate project, which had been abandoned for the past three years.
The Sandalwood real estate project was developed by Sichuan Haoyuan Hengda Industrial Group Co., Ltd. ("Haoyuan") without the permission of the majority shareholder of Tongze, and was halted when it ran out of cash with less than 10% of its construction work complete. After Haoyuan was accused of illegal absorption of public savings, Tongze's land use right was seized by multiple courts and public security bodies. This rendered it impossible for Tongze to continue the property development project. In the following three years, all attempts to resume the project ended in failure.
On May 15, 2018, creditor Yang Haojin filed an application to the People's Court of Jiangyou City for corporate consolidation of Tongze, but considering the consolidation fund and possible repeated failure of the transaction, the court did not directly accept the consolidation application, but rather designated the DeHeng Chengdu and Sichuan Shuxing Law Offices to act as consolidation administrators of Tongze, and demanded that the two administrators demonstrate the necessity and feasibility of Tongze’s bankruptcy and consolidation.
After the Decision of the People's Court of Jiangyou City of Sichuan Province ([2018] S0781 P.S No.7) was issued, the two administrators posted an announcement to the West China Metropolis Daily calling for creditors of Tongze to declare their rights. From June 19 to July 18, 2018, a total of 50 creditors' rights were declared, which amounted to 856 million yuan. On July 30, 2018, the administrators held a pre-consolidation meeting for creditors at the People's Court of Jiangyou City. The meeting adopted by vote the Plan for Corporate Consolidation and Investment Attraction of Sichuan Tongze Real Estate Co., Ltd., and demonstrated the necessity and feasibility of Tongze's bankruptcy and consolidation.
The consolidation project considered how the court and the government could collaborate to address issues of failed property projects. Despite the capital chain rupture, the crossing of stocks and bonds, and the criminal and civil liabilities, and despite the many parties involved in the case, the administrators managed to resolve the complicated factual and legal relations and to secure investment after rounds of negotiation. At the pre-consolidation meeting, the consolidation and investment attraction plan was announced and was approved by both creditors and debtors. The DeHeng team was highly praised by the local court and government for its in-depth knowledge of the project, expertise, diligence, and efficiency.
