Recently, the Hong Kong High Court issued a crucial ruling in the case of China Evergrande Group (hereinafter referred to as: Evergrande) versus Xu Jiayin and several other defendants (Document No. [2025] HKCFI 4327). Due to Xu Jiayin and others' failure to comply with asset disclosure orders, the court officially appointed Evergrande's liquidator as the receiver of all their assets. The scope of receivership not only covers personal properties but also includes assets indirectly controlled by Xu Jiayin through offshore affiliated companies, which may involve trust structures.
However, according to the full text of the ruling and details of the judicial proceedings, the multi-billion trust fund involving core interests may not yet have entered the "pierced" stage.
From the perspective of Yang Xiang, a Doctor of Law from Tsinghua University, the Hong Kong High Court merely imposed asset preservation or asset freezing orders on Xu Jiayin and his wife, and appointed Evergrande Group's liquidator as the receiver and manager of all Xu Jiayin's assets and businesses. "Although the judge emphasized in the judgment document that several offshore trust accounts under Xu Jiayin's substantial control are also included in the receiver's scope, the judge also stressed that the purpose of implementing receivership is to prevent asset dissipation risks or other crises that may lead to asset loss, ensuring that Xu Jiayin and his wife comply with the injunction and cannot illegally transfer assets, so that future property judgments can be executed," Yang Xiang analyzed.
Therefore, this legal battle surrounding the trust structure remains in the "investigation period" rather than the "termination period."
**Court Focuses on "Asset Supervision"**
Tracing back the case's context, the direct cause of this receivership application was Xu Jiayin's failure to comply with the legal document issued by Judge Coleman on June 24, 2024. At that time, the court not only issued a Mareva injunction (freezing order) totaling $7.7 billion against Xu Jiayin, prohibiting him from disposing of related assets worldwide, but also attached a disclosure order requiring him to declare through an affidavit within seven days "all assets valued at HK$50,000 or above," regardless of whether the assets were located in Hong Kong or overseas, held in his own name or others', owned individually or jointly. This specifically included "assets of companies listed in Annex C and the whereabouts of sold assets."
The 14 companies in Annex C, including the fourth defendant Xinxin (British Virgin Islands) Limited, are precisely the underlying asset-holding entities commonly found in offshore trust structures.
However, according to the judgment record, "Xu Jiayin fundamentally failed to comply with the disclosure order," neither explaining the relationship between the aforementioned companies and the trust structure nor disclosing the actual control situation and flow of related assets.
Against this backdrop, Evergrande issued a "receiver's summons" on April 3, 2025, applying for the appointment of the liquidator as Xu Jiayin's asset receiver, which the court ultimately supported.
Additionally, the court clearly defined the boundaries of the receiver's authority in its ruling: only authorizing them to "identify, preserve, and investigate" Xu Jiayin's related assets, ensuring the execution of the $7.7 billion freezing order and maintaining the status quo of assets. The court also removed clauses from the draft receivership order that might have granted the receiver power to "dispose of assets" and made no final determination regarding the core legal attributes of the trust itself, such as the legitimacy of its establishment, beneficiary arrangements, or asset ownership.
"The court's current action addresses the question of 'whether assets can be managed' rather than 'whether the trust should be abolished,'" said Ji Hongfei, a senior lawyer at Beijing Yinao Law Firm. This means that the continuing validity of the trust structure has not been negated; only that its associated assets are no longer in a "concealed state." The court's focus in this case is on whether Xu Jiayin "substantially controls assets through family trust structures while evading disclosure obligations," and the receivership ruling is a judicial response to this potential risk.
Yang Xiang also believes that the judge emphasized that Xu Jiayin has consistently failed to comply with disclosure orders completely, leaving the court unable to supervise the execution of the freezing order, while appointing a receiver is the only way for Evergrande Group to obtain information that should have been disclosed by Xu Jiayin.
Notably, in this case, a judge indicated that Xu Jiayin's affiliated companies and family trusts exhibit "shadow operation characteristics," with their establishment and continuation primarily aimed at "holding and transferring assets while evading judicial supervision." Therefore, receiver intervention is necessary to clarify the actual asset ownership and flow behind the trusts and companies.
**Offshore Family Trust Faces "Penetrative Investigation"**
According to the court's final ruling, the investigation and supervisory authority of the receiver (Evergrande's liquidator) regarding potential trust-related assets will focus on three core areas:
First, examining books, records, and documents of trust-related affiliated companies (such as Schedule 1 companies) to investigate the relationship between trusts and these companies and their asset holdings;
Second, verifying the sale and transfer trajectory of trust-related assets to prevent asset dissipation;
Third, for delisted British Virgin Islands companies involved in trust asset holding or management, applying through legal procedures to restore their registration status to trace the whereabouts of trust assets.
The receiver has no authority to interfere with the trust's legal continuation, change trust beneficiaries, or dispose of trust assets (such as selling or mortgaging assets under the trust's name). They may only work to ensure injunction compliance and prevent trust asset dissipation.
Meanwhile, to ensure the receiver performs duties fairly when handling trust-related assets and avoids conflicts of interest, the court has established an independent supervision mechanism, appointing Mr. Keith Ho from Wilkinson & Grist as supervising lawyer. The receiver must regularly report to him on the investigation progress of potential trust-related assets. If actual or potential conflicts of interest are discovered in the receiver's handling of trust assets, the receiver and supervising lawyer must reach consensus on response measures. If disputes exist between the two parties, court adjudication is required before proceeding.
"The court's receivership arrangement for potential trust-related assets in this case reflects a judicial attitude of 'penetrating form and focusing on substance,'" Ji Hongfei stated. In similar past cases, assets under offshore structures were often difficult to supervise due to "legal entity independence," while this case's dual constraints of authority and supervision provide clear reference for subsequent judicial supervision of cross-border trust-related assets.
Yang Xiang also noted that procedures for tracing, freezing, and executing overseas property are extremely complex and costly. Judicial assistance and execution between countries often face numerous obstacles. "As for whether offshore trust property belongs to Xu Jiayin and his wife's personal property and whether it can be pursued by their creditors, creditors need to file separate substantive litigation to pierce the veil of offshore trusts thousands of miles away. Before the corporate or trust legal structure is pierced, creditors cannot substantially garnish or execute property under relevant companies' names or trust property solely based on Hong Kong court procedural freezing orders."
From judicial practice perspective, similar cross-border trust "piercing" cases often require lengthy cycles. The trust associated with Xu Jiayin involves larger asset scales, more complex structures, and multiple offshore jurisdictions, making subsequent legal battles even more difficult.
Nie Junfeng, Chairman of Jinghua Shijia Family Office, also stated that the "complete piercing" of Xu Jiayin's offshore family trust is indeed a misinterpretation. It can be foreseen that as the "liquidator" clarifies asset conditions and verifies legal relationships, assets held by Xu Jiayin's family through technical divorce and family trusts will gradually emerge. However, "completely piercing" the family trust still requires substantial legal litigation procedures.
Regarding the impact of this ruling on the family trust field, a relevant person from a domestic trust company candidly stated: "In the future, high-net-worth individuals will need to pay more attention to 'control transparency' and 'compliance disclosure' when allocating assets through offshore family trusts, and can no longer rely on 'structural concealment' to evade potential judicial obligations. After all, the core value of trusts is asset isolation and inheritance, not evading legal responsibilities."
Currently, Evergrande's liquidator has begun advancing investigation work on affiliated companies and family trust assets, while Xu Jiayin must raise objections regarding cost-bearing within 14 days. If no objections are raised, he will bear all costs of this receivership application.
This judicial battle surrounding family trust assets will continue to impact the resolution process of Evergrande's debt crisis.
Comments