Skillfully setting up the trading scheme to revitalize the non performing assets of the project


In 2018, our lawyers provided legal due diligence services for a Beijing Development Company's acquisition of a real estate project of a company in Wuhu (hereinafter referred to as the "target company"), participated in business negotiations, proposed solutions to key problems found in the process of legal due diligence, drafted transaction documents and issued legal opinions.

[Key words] Construction in progress, disposal of non performing assets, entrusted sales

[Project information]

In 2011, the target company obtained the project land through the open market, and the purpose of the parcel was residential. The planned construction land of the project is about 40000 square meters, including residential building, supporting commercial club and underground garage. At present, some residential buildings have been sold, but commercial clubs and underground garages are not.

Due to the disconnection of project funds and the failure to complete the project on time, the buyer has appealed to the urban government, which has seriously affected social stability. Some houses of the project have been frozen for sale and incorporated into the government's pre-sale supervision system. Therefore, the client intends to enter the target company through equity acquisition and revitalize the project through capital investment. Therefore, the client entrusts our lawyer to supervise the target company and the target project To conduct legal due diligence.

[Difficulty or novelty of the project]

The difficulties of this project are as follows:

First, the equity of the target company is pledged.

According to the industrial and commercial archives of the target company obtained by our lawyer from the local administration for Industry and commerce, 80% of the equity of the target company has been pledged to individuals, and the target company is unable to provide the equity pledge agreement and the corresponding master creditor's rights agreement. If the way of equity acquisition is adopted, the written consent of the pledgee to the transaction shall be obtained first.

Second, the target company has a large scale of liabilities.

According to our lawyer's investigation, the target company's financing loans, engineering contracts and other debts are large in scale and have not yet been settled. At present, some of them have been involved in litigation disputes, and the remaining debts do not rule out the subsequent breach of contract and litigation. At the same time, because the financial statistics of the target company is chaotic, the risk of undisclosed debt cannot be ruled out.

Third, the target company and the main contractor have not signed a settlement agreement, and there is a possibility of claims.

The target company has not signed a settlement agreement with the main contractor, and the main contractor may claim compensation from the target company in the future due to the target company's delay in payment.

Fourth, some properties of the target project are sealed up.

Due to the large amount of debt of the target company, some creditors have filed a lawsuit and sealed up part of the real estate of the target project, which has the risk of being auctioned, sold and other enforcement measures.

Fifthly, some of the houses in the target project are sold twice.

On the one hand, the target company signs part of the real estate online to the creditors for debt repayment; on the other hand, it sells the part of the real estate to the third party buyers. There is a situation of two sales of one house, and it is likely to bear the corresponding liability for breach of contract due to two sales of one house.

Sixth, there is a serious delay in the delivery of the target project.

Due to the disconnection of project funds and the failure to complete the project on time, there is a serious delay in the delivery of the target project. If the buyer brings a lawsuit, the target company may bear the responsibility for breach of contract.

[Lawyer response]

In order to complete the project, the lawyer team of our firm, on the basis of fully collecting the information of the target company, successively visited the competent government departments where the project is located, went to the project site for on-the-spot inspection, and communicated with various parties to understand the attitude of the government, sort out the historical evolution of the company and the project evolution, and discussed the follow-up treatment of the project. At the same time, several meetings were held with the client to communicate and discuss the project. Firstly, from the perspective of the legal and compliance requirements of the project itself, referring to the legal provisions, the key problems of the project were sorted out and the preliminary treatment plan was determined. Secondly, considering the client's business purpose and the legal problems and risks of the project, the solutions were put forward for the problems that need to be solved, and the project management plan was put forward In order to reduce the investment risk of the client to the minimum and ensure the smooth progress of the project, we suggest the inherent risk of the client and put forward the risk control scheme, and persuade the client to change the original trading mode of equity acquisition into commission sale.

[Achievements and summary of legal services]

As of December 2018, our lawyers and others have completed the on-site due diligence of the project, issued tips on key issues of legal due diligence, legal due diligence report and legal opinions, and drafted a series of documents required by the exchange according to the situation of business negotiation, successfully realizing the client's business objectives.