BEIJING, September 29 (TMTPost)— China Evergrande Group confirmed its founder and chairman Hui Ka Yan is under police surveillance and suggested he may have committed crimes.

Credit：Visual China

Hui Ka Yan has been subject to “mandatory measures” under the law “due to suspicion of illegal crimes”, according to an Evergrande filing with the Hong Kong Stock Exchange (HKEX) on Thursday. The filling said Evergrande was informed by authorities about Hui’s being under investigation, without giving any details.

Hui was taken away along with his younger son Peter Xu, who used to lead Evergrande’s wealth unit, Chinese business and financial media outlet Yicai cited an insider late Thursday. Prior to Hui and his son, a number of former Evergrande executives were said to be detained.  The first executive to be taken away was Ke Peng, the former executive president of Evergrande Group, who was nabbed by the police for investigation in January in connection with his involvement in Evergrande's Shenzhen’s shanty town revamping. On September 16, Du Liang, the general manager of Evergrande Wealth Management, Evergrande's financial subsidiary, and other individuals suspected of crimes were taken into custody by the Shenzhen police. A week ago, Zhu Jialin, the former Chairman of Evergrande Life Assurance, was reported to be under investigation. Pan Darong, former chief financial officer who resigned in July, 2022, was said earlier this week to have been detained by Chinese authorities.

Evergrande’s latest statement confirmed recent news. Bloomberg reported Wednesday that Hui has been taken away by Chinese police earlier this month and is being under police control at a designated location. The report didn’t figure out why Hui is under so-called residential surveillance, but noted the surveillance means he is not allowed to leave the location, meet or communicate with others without approval. Reuters’ sources later that day revealed Hui had stopped contacting staff in the past few days.

However, Hui’s being under “mandatory measures” is sort of different with the reported residential surveillance, and he is very likely to be committing multiple crimes, which means it could take quite a lot of time to decide, Chinese newspaper 21st Century Business Herald cited a criminal law expert.

Earlier Thursday, shares of China Evergrande Group along with its new energy vehicle unit and property services unit were suspended from trading in Hong Kong, signaling crisis of the company is worsening.

Evergrande is the world's most indebted property developer, which first declared a default on its debt in late 2021 when the second largest property developer in China had a total of more than US$300 billion in liabilities. Financial reports disclosed in April showed the company’s debt load reached RMB2.44 trillion as of December 31, 2022, reducing RMB140 billion from late 2021. The insolvency gap increased from RMB 473.1 billion to RMB599.1 during the year 2022.

Last Friday, Evergrande disclosed it won’t hold meetings about proposed debt restructuring on September 25 and 26 because of worse-than-expected sales since it announced the meeting schedule in March. “Based on the company’s current situation and consultations with its advisors and creditors, the company considers it necessary to re-assess the terms of the proposed restructuring to meet the company’s objective situation and the demand of the creditors,” it said. While not elaborating creditors’ demand, the company said it would make public statement if there were any change about terms of restructuring proposal.

The cancellation of meeting due to sales was a surprise as Evergrande just posted improved financial performance last month. In a report of interim financial results to HKEX in August, the company posted net loss of RMB33 billion (US$4.53 billion) from January to June, narrowing more than 40% from the same period last year. Operating losses in the first half of the year were RMB17.38 billion, more than 64% down from a year earlier. Revenue in the first half jumped 44% year-over-year (YoY) to RMB128.18 billion, and gross profit rose 38% to RMB9.8 billion.  

Days after announcing dropping the restructuring meeting plan, Evergrande said it is currently unqualified for issuance of new notes as its subsidiary Evergrande Real Estate Group Limited is under investigation by the China Securities Regulatory Commission (CSRC), China’s top securities regulator. The developer said it has to prove that any proposal of new debt issuing under restructuring has complied with relevant regulations introduced by CSRC and the National Development and Reform Commission (NDRC).