The Hong Kong Securities and Futures Commission has reached an agreement with PricewaterhouseCoopers Hong Kong under which PwC Hong Kong will set aside HKD 1 billion to compensate eligible independent minority shareholders of China Evergrande Group. The settlement resolves the matter fully and finally without admission of liability, and the SFC will take no further action against PwC Hong Kong provided it fulfils the agreement’s terms. The SFC’s investigation found that China Evergrande’s FY2019 and FY2020 annual reports and results announcements contained materially false or misleading information, particularly on revenue recognition, with revenue and profits overstated through premature recognition of property sales before completion and delivery. Audited annual revenue was overstated by RMB213.9 billion (44.79%) for FY2019 and RMB350.2 billion (69.03%) for FY2020, and audited profits of RMB33.5 billion and RMB31.4 billion should have been losses of RMB7.12 billion and RMB19.9 billion respectively. In reviewing PwC Hong Kong’s role as auditor, the SFC concluded there was market misconduct involving dissemination of false or misleading financial information and serious breaches of auditors’ professional duties, including failures relating to independence, professional scepticism, effective site inspections, handling of audit irregularities, verification of supporting documents, and acquiescence to management manipulation of audit samples and site inspections. PricewaterhouseCoopers Zhong Tian LLP assisted PwC Hong Kong in the audits. Compensation will be allocated through a process overseen by an independent administrator, with detailed provisions to be published in due course. Independent minority shareholders and their intermediaries were advised to retain transaction records for claim purposes, and intermediaries were reminded to provide reasonable assistance to shareholders making claims.
Hong Kong Securities & Futures Commission 2026-04-23
Hong Kong Securities and Futures Commission agrees with PwC Hong Kong to set aside HKD 1 billion to compensate eligible China Evergrande minority shareholders
The Hong Kong Securities and Futures Commission has reached a no‑admission settlement with PricewaterhouseCoopers Hong Kong under which the firm will set aside HKD 1 billion to compensate eligible independent minority shareholders of China Evergrande Group. The SFC found that Evergrande’s FY2019 and FY2020 financial statements contained materially false or misleading information, with substantial overstatement of revenue and profits, and concluded there was market misconduct and serious breaches of auditors’ professional duties by PwC Hong Kong. Compensation will be distributed under a process overseen by an independent administrator.