A B.C. judge has denied a receivership application from the purported majority shareholders of residential development firm Coromandel Properties Ltd. who claim management is threatening the company’s assets.
According to the Dec. 12 ruling, shareholders Zhao Ming Mo, Zi Hao Mo, the ZHM Family Trust 2020, and the Birch Family Trust claimed current management is threatening the company's assets by failing to attend to day-to-day operations, pay outstanding professional fees, and respond to the landlord of the company's head office. Management has also failed to respond to correspondence from the Canada Revenue Agency and file tax returns, the shareholders submitted.
It “appears to be uncontroverted” that Coromandel manager Zhen Yu Zhong, also known as Jerry Zhong, “is not carrying out these functions adequately or at all,” wrote Justice Kevin Loo in his decision.
However, while Loo agreed the evidence shows Coromandel “has failed to adequately or properly perform the day-to-day operations of the debtor companies,” the judge found too many problems with granting the application, which was opposed by secured lenders and “other stakeholders” of the company’s operations.
The opposing lenders and stakeholders argued that putting the company into receivership would imperil “future legal proceedings against properties owned by the company.” Among other concerns, the respondents also said the receivership application could interfere unnecessarily with other ongoing enforcement proceedings against the financially troubled subsidiaries.
Loo called the proposed terms “onerous” especially given it wasn’t clear how much economic interest the applicants have.
Coromandel Properties Ltd. carries out much of its business through separate limited partnerships, or subsidiaries, that manage individual projects, noted the ruling.
Loo found that the applicants did not fully convey their ownership interests in the company or those subsidiaries.
The Mos are the children of Junchao Mo and told the court they own 70 per cent of Coromandel. They said Junchao Mo and Zhong entered a partnership when they launched Coromandel, which now has $700 million of debt and 16 ongoing development projects.
The application to put Coromandel’s numerous companies into receivership came after it hit financial problems due to rising interest rates and project completion delays, claimed the shareholders.
In February, the company filed for creditor protection for its subsidiary companies. Those proceedings were cancelled in March when a proposed sale was put on the table. That proposal, however, never materialized, leading to this latest court action.
In September, Coromandel’s chief operating officer and former Vancouver city councillor Raymond Louie departed the company after working there for close to five years.
