China Haida looking into the freezing of two bank accounts of its subsidiary after interim court order

Mainboard-listed China Haida said in a statement on Wednesday that it has come to its attention that two bank accounts of its wholly-owned subsidiary, Jiangyin Litai Ornamental Materials Co, have been frozen following an interim court order issued by a Sichuan court. A third bank account has been restricted. 

China Haida has made enquiries with Jiangyin Litai's finance team, and obtained a copy of an interim court order dated last Nov 28, which is "seemingly relevant or connected to" the freezing of the two bank accounts. 

The interim court order was made pursuant to an application filed by one Zhang Kun against 12 respondents, including Jiangyin Litai and China Haida chief executive Xu Youcai. The purpose of the application was to preserve or freeze the assets of the respondents up to a sum of 14 million yuan (S$2.83 million); the outcome of that was in Mr Zhang's favour. 

China Haida said it appears that the application was made in connection with a pending legal dispute over some lending/borrowing affairs between the applicant and the respondents. The company said it is trying to get to the bottom of what has happened, including the circumstances under which Jiangyin Litai became involved and the extent to which its assets are subject to preservation or restrictions. China Haida added that the contents of the interim court order are scanty, and that it does not provide details of the main or substantive legal dispute. 

China Haida also said that Jiangyin Litai's finance team has been slow to respond due to the Covid-19 outbreak in China.

The two current accounts of Jiangyin Litai have been frozen for 12 months - one from March 10, 2020, and the other from March 18. The balances of the accounts as of the effective dates were not stated in the bank's confirmation to China Haida's external auditors, but the balances as at Dec 31, 2019 were 753,726 yuan and US$3,001.54 respectively.

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The general-deposit account that is now subject to a pledge or other restrictions had a balance of 913,256 yuan as at Dec 31, 2019. That account lies with a different bank.

The company is working with its auditors to find out whether any other bank accounts of Jiangyin Litai have been affected. Confirmation requests have been sent to all nine banks with which Jiangyin Litai had a relationship. As of Wednesday, four banks had replied; only two warrant special attention.

China Haida has requested for a lifting of a halt in the trading of its shares. The group had requested the halt last Friday, pending the release of an announcement.

The counter last traded at 0.4 Singapore cent last Friday.