On April 23, 2026, the SFC reached an agreement with PwC HK to set aside HK$1 billion to compensate eligible independent minority shareholders of China Evergrande Group for false financial statements in 2019 and 2020.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On April 23, 2026, the Securities and Futures Commission ("SFC") has reached an agreement with PricewaterhouseCoopers Hong Kong ("PwC HK") to set aside HK$1 billion for eligible independent minority shareholders of China Evergrande Group (China Evergrande). PwC HK audited China Evergrande’s financial statements for FY2019 and FY2020. The SFC’s investigation found that the company, currently in liquidation, had substantially overstated its annual revenue and profits, constituting market misconduct due to false financial information and breaches of auditors’ professional duties. Under the agreement, the matter will be fully resolved without admission of liability, and the SFC will take no further action against PwC HK provided the terms are fulfilled.
False and misleading statements of China Evergrande
The SFC determined that FY2019 and FY2020 reports contained materially false information regarding revenue recognition. China Evergrande manipulated revenue by recognising property sales prematurely before completion and delivery. The SFC concluded audited revenue was overstated by RMB213.9 billion (44.79%) for FY2019 and RMB350.2 billion (69.03%) for FY2020. Consequently, reported profits of RMB33.5 billion and RMB31.4 billion should have been losses of RMB7.12 billion and RMB19.9 billion, respectively.
Auditor’s role and failures
PwC HK was the auditor for FY2019 and FY2020, assisted by PricewaterhouseCoopers Zhong Tian LLP. The SFC considers PwC HK concerned in disclosure of false information under section 277 of the Securities and Futures Ordinance ("SFO") (Note 2), failed to maintain independence, and lacked professional scepticism in planning and procedures. Failures included inadequate site inspections for property status, acquiescence to management manipulation of samples and inspections, and insufficient verification of supporting documents.
Definition of Section 277
Section 277 of the SFO prohibits the disclosure of materially false or misleading information likely to induce investment decisions or materially affect securities prices.
To secure compensation, the SFC determined the agreement serves shareholders' best interests, with HK$1 billion allocated via an independent administrator. Shareholders must retain transaction records, and intermediaries should assist in filing claims. Ms Julia Leung, SFC CEO, noted this is the first instance of auditors of a defunct company compensating harmed shareholders, signalling the SFC’s commitment to market integrity and accountability. Mr Michael Duignan, SFC Executive Director of Enforcement, emphasized auditors are gatekeepers; undermining controls erodes trust and damages market integrity. The SFC expressed gratitude to the Ministry of Finance and the China Securities Regulatory Commission for their support, highlighting strong inter-regulator cooperation.
Notes
China Evergrande was listed on the Main Board of The Stock Exchange of Hong Kong Limited in November 2009 under stock code 3333 and delisted in August 2025. It was once one of the largest property developers in China.
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