Yangzijiang Shipbuilding unit ordered to wind up over unpaid US$4.8 million debt

A YANGZIJIANG Shipbuilding unit that used to hold at least 43 subsidiaries has been ordered to wind up, after it failed to pay monetary compensation to a customer over a botched sale.

Singapore’s High Court on Friday (Mar 17) granted the application by Liberian company Trinity Seatrading for Yangzijiang Shipping to be liquidated because the Singapore-incorporated company is unable to pay a debt of over US$4.8 million owed to Trinity Seatrading. The liability arose from an arbitration award in the United Kingdom.

Trinity Seatrading has declined to take delivery of an oil tanker sold by Yangzijiang Shipping as the vessel was not made according to specifications. It was awarded by a UK arbitration tribunal on Jul 18, 2022, for the refund of the US$12.2 million deposit it had paid and monetary compensation of US$3.25 million – both with interest.

Trinity Seatrading has had its deposit refunded but not yet been paid the compensation nor accrued interest, despite demanding for payment.

Una Khng of law firm Helmsman LLC, representing Trinity Seatrading in the winding-up application, told Justice Philip Jeyaretnam on Friday that Yangzijiang Shipping had transferred its stakes in at least 40 subsidiaries to sister company Pleasant Way Analyse Development within two months after the arbitration outcome.

Pleasant Way Analyse Development is British Virgin Islands (BVI)-incorporated and, like Yangzijiang Shipping, is also wholly owned by the China-based Yangzijiang Shipbuilding.

Before the transfers, Yangzijiang Shipping fully owned 38 of these units and held almost 50 per cent of shares in each of the remaining two.

Khng noted that these subsidiaries were intended to continue to be held by Yangzijiang Shipping following the spin-off of the group’s investment business into Yangzijiang Financial Holding . She referred to the group structure set out in a circular issued by Yangzijiang Shipbuilding to shareholders in April 2022 – as recently as three months before Trinity Seatrading won the arbitration.

The majority of the subsidiaries held by Yangzijiang Shipping are registered owners of vessels and are therefore “valuable” companies. It is unknown whether Yangzijiang Shipping has received anything valuable in return for the transfers, Khng said.

The explanation furnished by Yangzijiang Shipping for the transfers was that Pleasant Way, being a BVI company, will have more flexibility to apply for public listing in various potential jurisdictions and markets, noted Khng. This was a bare assertion, she contended, as there was no elaboration on what these “potential” jurisdictions and markets were.

Yangzijiang Shipping’s counsel Bernard Yee argued that there is a risk the liquidators may decide that the company withdraw from a civil claim it has initiated in a Chinese court over the botched sale. That hearing will take place in April 2024.

“As far as I know, there is only one creditor that has surfaced, therein lies the concern. Being the sole creditor, they can stifle the claim; if the (Chinese) claim succeeds, it might have an impact on Trinity’s claim,” Yee said.

Justice Jeyaretnam said Yangzijiang Shipping’s proceedings in China are a challenge on the validity of the arbitration outcome through a new case rather than by an appeal. He also stated that liquidators would independently view creditors’ interests as a whole.

Yangzijiang Shipping has 28 days to file an appeal against the winding-up order.