The liquidators of China Evergrande Group are seeking to overturn a HK$1 billion settlement between PwC Hong Kong and Hong Kong’s Securities and Futures Commission (SFC), arguing that the regulator overstepped its powers and failed to take account of the interests of Evergrande and its creditors.
At a judicial review hearing on 19 August, lawyers for the SFC asked Hong Kong’s High Court to dismiss the challenge. The regulator argued that it had broad powers under the Securities and Futures Ordinance to resolve enforcement matters through pre-litigation settlements. Lawyers for the liquidators accused the SFC of circumventing judicial safeguards. Mr Justice Russell Coleman reserved judgment.
The dispute centres on an agreement announced on 23 April 2026, under which PwC Hong Kong agreed to set aside HK$1 billion to compensate eligible independent minority shareholders of Evergrande. The SFC said the money would be allocated through a process overseen by an independent administrator. The agreement resolved the SFC’s case against PwC Hong Kong without the firm admitting liability, provided PwC fulfils its terms.
Lawyers told the court this week that PwC Hong Kong had already placed the HK$1 billion in a separate bank account for the compensation fund.
Evergrande’s liquidators, Tiffany Wong and Eddie Middleton of Alvarez & Marsal, argue that the agreement prejudices the company’s creditors. In their application for judicial review, they said Evergrande’s creditors had been made HK$1 billion worse off, and argued that PwC Hong Kong’s assets were unlikely to be sufficient to meet both the SFC agreement and the liquidators’ separate claims against the firm.
They also argued that the SFC had failed to consider whether its agreement with PwC would unfairly prejudice Evergrande and its creditors. At this week’s hearing, the SFC characterised the dispute as a complaint that minority shareholders had effectively been allowed to “jump the queue” and receive compensation from PwC while its ability to meet claims from Evergrande and its creditors remained uncertain.
The HK$1 billion agreement followed an SFC investigation into Evergrande’s 2019 and 2020 financial reporting. The regulator found that Evergrande had overstated audited revenue by RMB213.9 billion in 2019 and RMB350.2 billion in 2020, largely through premature recognition of revenue from property sales. The SFC also concluded that there had been serious breaches of professional duties by PwC Hong Kong in connection with the audits. PwC did not admit those findings.
The shareholder settlement is separate from a much larger lawsuit being pursued against PwC by Evergrande’s liquidators.
They are seeking RMB57 billion, approximately US$8.4 billion, in total from PwC entities over the audit work. Of that amount, RMB38 billion is being sought from PwC International, PwC Hong Kong and PwC’s mainland China firm together, while a further RMB19 billion is being sought from the Hong Kong and mainland entities. The proceedings allege negligence and misrepresentation.
PwC International has argued that it should not be a party to the case. At a May hearing, its lawyer said the Hong Kong and mainland firms were not its subsidiaries and argued that PwC International had no direct relationship or duty of care to Evergrande. Lawyers for the liquidators argued that the international entity sits at the top of the network and bears responsibility for maintaining standards across member firms.
PwC Hong Kong has also faced separate action from Hong Kong’s Accounting and Financial Reporting Council. On 23 April, the AFRC fined the firm HK$300 million and imposed a six-month practice limitation preventing it from accepting, performing or issuing reports on public-interest-entity audit engagements for new clients. The regulator found misconduct across the Evergrande audits, including failures of professional scepticism and audit independence.
PwC Hong Kong said after the regulatory actions that its work on the Evergrande audits had “fell well below” its expectations and those of its stakeholders, but stressed that it had settled with the SFC without admitting liability or agreeing with the regulator’s conclusions.
The High Court has yet to decide whether the liquidators’ challenge succeeds. For now, the HK$1 billion remains set aside for shareholder compensation while the liquidators continue their separate multibillion-dollar claims against PwC.
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