Former China Sky Chemical Fibre executive director sued over unpaid bank loan
Huang Zhong Xuan, former executive director and CEO of China
Sky Chemical Fibre, has been accused of defaulting on a $7.5 million loan from
a bank. The bank has filed a lawsuit against Huang and three guarantors,
including his wife, in the High Court to seek the return of the amount owing.
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Han Poh Tin, Lianhe Zaobao
13 June 2012
This article was first published on 11 June 2011 in the Singapore Mandarin broadsheet, Lianhe Zaobao.
Huang Zhong Xuan, former executive director and CEO of China Sky Chemical Fibre, has been accused of defaulting on a $7.5 million loan from a bank. The bank has filed a lawsuit against Huang and three guarantors, including his wife, in the High Court to seek the return of the amount owing.
The plaintiff, HL, Bank, has applied for a Mareva Injunction from the High Court to prevent the defendants from selling or dissipating their assets in Singapore.
As this application was submitted in chambers, the lawyers representing the bank declined to reveal any information surrounding this application. Therefore, the outcome of the application remains unknown. However, it is understood that High Court Justice Choo Han Teck has approved some items in the application.
Apart from Huang Zhong Xuan, the three other parties listed as defendants in this case are Rock Mart Equities Ltd (a British Virgin Islands-registered company), Huang Liyun (Huang Zhong Xuan’s wife) and China Sky Chemical Fibre non-executive chairman Cheung Wing Lin. The three defendants are guarantors to the loan taken out by Huang from HL Bank.
Cheung, 44, is also the legal representative of Quanzhou Tianyu Chemical Fibre and Weaving Co Limited. The company is a core subsidiary of China Sky. The counsel for the plaintiff noted that Huang Zhong Xuan and Huang Liyun hold Chinese citizenship and Singapore permanent resident status.
HL Bank obtained the approval of the High Court to mail the legal documents, including the writ of summons, to the registered address of Rock Mart in the British Virgin Islands. It also obtained approval to mail copies of the documents to the registered addresses of the three other defendants in Quanzhou city in China’s Fujian province. However, it remains unclear whether the defendants ultimately received these papers. As of now, none of the defendants have submitted their defence.
According to the writ of summons submitted by HL Bank, it approved a stock margin loan capped at $10 million applied by Huang Zhong Xuan in October 2010. The bank sent a letter to Huang on 29 November last year to seek the return of the more than $7 million he owed the bank. However, Huang refused to repay the sum.
HL Bank then sent letters seeking the repayment of the loan from Rock Mart, Huang Liyun and Cheung Wing Lin on 18 January this year. However, these efforts also failed. The bank subsequently brought the matter to the High Court.
SGX ordered China Sky to appoint a special auditor to investigate some questionable transactions on 16 November 2011. China Sky requested a halt to the trading of its shares (which remains suspended) the following day. It then got involved in a public spat with the Singapore Exchange (SGX).
The company’s directors were publicly reprimanded by SGX at the end of last year. They were also issued with an ultimatum to comply with the requests of SGX. However, all of the company’s independent directors resigned en masse after the January deadline this year. Huang Zhong Xuan and the company’s CFO cum corporate secretary also resigned after SGX applied for a court order from the High Court to force China Sky to comply with its directives. At that point, apart from the company’s non-executive chairman Cheung Wing Lin, the only executive director that remained was Song Jian Sheng.
The Commercial Affairs Department announced an investigation into irregular transactions involving China Sky on 16 February this year. The Monetary Authority of Singapore’s application to the High Court to prevent Huang from withdrawing the funds in his Credit Suisse Group AG account in Singapore was subsequently approved.
Lawyers representing HL Bank informed the court in the latest Mareva Injunction application that if the provisional injunction obtained by MAS is revoked during the hearings, this would harm the interests of the bank. Hence, they have requested the court to issue another injunction to prevent Huang and other three defendants from transferring their assets.