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Foreland Fabrictech, unit hit with court enforcement notice over undisclosed lawsuit in China
FORELAND Fabrictech Holdings and one of its units have received a court enforcement notice from Fujian Jinjiang People’s Court over an undisclosed lawsuit that began in 2013 about a private lending and guarantee agreement over seven million yuan (S$1.4 million).
Under the notice, the Chinese textile maker is to perform the obligations as enforced in the legal documents, double payment of the interest charged and/or late payment charges incurred for late payment of the loan amount, and pay legal costs incurred for the issuance of the notice. The court will also impose some expenditure restrictions on the company and the subsidiary Fujian Jinjiang Fulian Knitting Co.
The company said in a Singapore Exchange (SGX) filing on Monday that the board had not been aware of the agreement which was entered into by the company, the subsidiary Fujian Jinjiang Fulian Knitting Co, former executive chairman Tsoi Kin Chit, former executive director Cai Fengquan, and 泉州星皓机械有限公司 with Hong Youling.
The company said that it is seeking legal advice, and it could be possible to challenge the effectiveness of the guarantee provided in the company's name as it was not notified of the legal suit and not given a proper chance to defend itself in court.
The company added that it is insolvent, and is "exploring various options and is in discussion with potential investors".
This came two months after Foreland Fabritech warned on Singapore Exchange that it may have lost control of subsidiary Fulian Knitting Co, as Mr Tsoi had been “increasingly reluctant” to cooperate in matters relating to the subsidiary which he is effectively controlling.
Mr Tsoi resigned in August 2016, and was publicly reprimanded by the SGX in November 2016, and the company had lodged a complaint with the Commercial Affairs Department against him centred on 290 million yuan paid as compensation by Fulian to a customer.
On May 6, Mr Tsoi stated that he would not cooperate or allow the company access to Fulian’s funds, and also declined to change the legal representative of Fulian from himself to executive chairman Yang Meng Yang.
On May 9, Foreland’s lawyers in China issued a due diligence report on Fulian, which disclosed a total of 26 court proceedings against the subsidiary, contrary to Mr Tsoi’s negative assurance confirmations and records in Fulian. Mr Tsoi’s staff in Fulian had omitted the court proceedings in their financial records; therefore, these court proceedings were not included in the auditor’s reports.
Foreland said in its May 9 announcement that it will continue to vigorously pursue the legal proceedings against Mr Tsoi. Foreland has a net carrying amount in Fulian as at May 9 of 61.1 million yuan.
Foreland Fabrictech's shares are suspended from trading on the SGX.