Executive Summary
Key takeaways from the Hong Kong High Court’s groundbreaking decision on Xu Jiayin’s assets:
– The court has authorized Evergrande’s liquidator to take control of all assets belonging to Xu Jiayin (许家印), including those held through offshore companies and potential trust structures
– This represents one of the most significant tests of offshore family trust protections in Chinese corporate history, with implications for high-net-worth individuals worldwide
– Legal experts emphasize the ruling focuses on asset preservation and investigation rather than immediate disposition, though cross-border enforcement remains complex
– The case demonstrates that offshore trusts provide no absolute protection when courts determine substantial control remains with the settlor
– Future developments will depend on investigation outcomes and cross-jurisdictional cooperation between Hong Kong and US courts
The Ruling That Reshaped Offshore Wealth Protection
In a decision that sent ripples across global financial markets, the Hong Kong High Court has fundamentally challenged conventional wisdom about offshore wealth protection structures. The court’s ruling to appoint Evergrande’s liquidator as receiver over all assets of company founder Xu Jiayin (许家印) represents a watershed moment for how courts view complex offshore arrangements. This case specifically addresses whether offshore family trusts can shield assets from creditors when substantial control remains with the original owner.
The offshore family trust has long been considered the ultimate wealth preservation vehicle for Chinese business elites. However, this ruling demonstrates that such structures offer no absolute protection when courts determine that the settlor maintains effective control over trust assets. The decision comes amid growing global scrutiny of offshore wealth structures and increasing judicial cooperation across jurisdictions.
Background of the Evergrande Collapse
China Evergrande Group (中国恒大集团), once China’s largest property developer, was ordered into liquidation on January 29, 2024, after failing to restructure its massive debt burden. The Hong Kong court appointed Edward Simon Middleton and Wong Wing Sze of Alvarez & Marsal Asia Limited as joint and several liquidators to oversee the winding-up process. The scale of Evergrande’s collapse is staggering – with creditors submitting claims totaling approximately HK$3.5 trillion (US$450 billion) as of July 31, 2025, significantly higher than the US$275 billion in liabilities disclosed by the Hong Kong-listed entity in 2022.
The liquidators immediately began global asset recovery efforts, focusing particularly on founder Xu Jiayin (许家印) and other former executives. In March 2024, the liquidators initiated legal proceedings against Xu Jiayin (许家印), his ex-wife Ding Yumei (丁玉梅), former CEO Xia Haijun (夏海钧), former CFO Pan Darong (潘大荣), and three entities associated with Xu and Ding. The lawsuit sought to recover approximately US$6 billion (RMB 43.8 billion) in dividends and compensation paid between 2017 and late 2020.
The Path to Comprehensive Asset Control
The court’s journey toward comprehensive asset control began with a Mareva injunction (asset freeze order) issued in June 2024, prohibiting Xu Jiayin (许家印) from disposing of assets worldwide valued at up to US$7.7 billion. The court also ordered Xu to disclose all assets worth HK$50,000 or more within seven days, regardless of location or nominal ownership. According to court records, Xu completely failed to comply with this disclosure order, leading the liquidators to apply for appointment as receiver on April 3, 2025.
On September 16, 2025, the Hong Kong High Court granted the application, authorizing the liquidators to identify, preserve, and investigate all of Xu’s assets, including those indirectly controlled through more than ten offshore companies that potentially involve trust structures. The court specifically noted that appointing a receiver became necessary as a last resort because Xu’s non-compliance rendered the injunction insufficient to maintain the status quo.
Legal Framework Behind the Asset Takeover
The Hong Kong High Court’s ruling rests on sophisticated legal principles that balance corporate liquidation procedures with equitable remedies. The decision draws authority from both the Companies (Winding Up and Miscellaneous Provisions) Ordinance and established principles of equity law. Central to the court’s reasoning was Xu Jiayin’s (许家印) complete failure to comply with the asset disclosure order, which constituted contempt of court and justified more severe measures.
This case represents a sophisticated application of what legal professionals call the Chabra jurisdiction, which allows courts to extend freezing orders to third parties whose assets are effectively controlled by the defendant. The offshore family trust arrangement in question faced particular scrutiny under this principle, as the court examined whether formal ownership structures reflected economic reality.
The Chabra Jurisdiction Explained
Named after the case TSB Private Bank International v Chabra, this jurisdiction enables courts to freeze assets held in the name of third parties when there’s good reason to believe those assets truly belong to the defendant or might be available to satisfy judgment against the defendant. In this case, the court determined that the offshore companies listed in Schedule 1 of the order qualified as companies associated with Xu Jiayin (许家印), making their assets subject to the receivership.
Justice of the Hong Kong High Court emphasized that in cases involving substantial international fraud, the critical question isn’t rigid legal ownership but rather the substantive reality of control. The ruling stated that if a defendant establishes a network of offshore companies and trusts to hold assets they control, with the apparent purpose of making themselves judgment-proof, courts will act to prevent their orders from being circumvented by opaque offshore structures.
Substantive Control Over Form
The court’s approach demonstrates the principle of substance over form – that legal technicalities cannot override economic reality. Even if assets are placed within discretionary trusts, the court maintained jurisdiction if factual evidence showed the relevant defendants exercised substantive control over those assets. This interpretation has profound implications for how offshore family trusts are structured and managed globally.
Liu Xinyuan (刘馨远), lead lawyer at Shanghai Qinbing (Beijing) Law Firm, explained: The court has not directly negated the independence of the trust, but based on Xu Jiayin’s actual control over the trust assets, considered it necessary to implement receivership. This actually pierces through the illegal desire and demand of the Xu family to use the trust to evade debts and conceal illegal gains, but does not directly deny the legal structure of the trust.
Is the Offshore Family Trust Truly Breached?
The central question dominating financial and legal circles is whether the court’s action constitutes a breach of the offshore family trust or merely represents investigative measures. Multiple legal experts emphasize the distinction between temporary asset preservation and permanent trust invalidation. The current receivership order authorizes the liquidators to prevent asset dissipation and conduct investigations but does not permit direct asset disposition without further court approval.
The offshore family trust established by Xu Jiayin (许家印) and Ding Yumei (丁玉梅) around 2019 was reportedly valued at US$2.3 billion, with their two sons designated as beneficiaries. The trust was established under Delaware law in the United States, adding layers of complexity to the cross-border enforcement effort. The question of whether this specific offshore family trust has been breached remains subject to ongoing legal proceedings.
Expert Perspectives on Trust Integrity
Legal professionals offer nuanced interpretations of whether the trust structure itself has been compromised. Huang Lichong (黄立冲), President of Huisheng International Capital, noted: The receiver’s authority is bounded by the court order, mainly involving identifying, controlling, and preserving assets, rather than immediately disposing of trust assets. The court, on the basis of the global freezing order, granted receivership pursuant to Section 21L of the High Court Ordinance, aiming to alternatively control the assets and information of entities actually controlled by Xu Jiayin (including offshore trusts) when Xu’s disclosure failed (dishonestly) and there was a risk of asset flight.
Song Jingyi (宋竟一), lawyer at Beijing Yingke (Guangzhou) Law Firm, added: Currently, the court has not directly determined that the trust has been pierced, but based on substantive control rights, has included the potentially involved trust assets within the scope of receivership. The independence of the trust has not been completely denied, but due to Xu Jiayin’s control over the involved trust assets, the court considered it necessary to implement receivership to protect the interests of creditors.
Distinction Between Investigation and Breach
Liu Xinyuan (刘馨远) emphasized the crucial difference between penetrating investigation and trust piercing: Penetrating investigation and trust piercing are essentially different in that the former emphasizes procedural takeover and investigation, while the latter is the legal determination of property ownership and legality. According to currently disclosed information, the receiver’s scope of authority is limited to the takeover and supervision of related assets, and has not reached the state where complete disposition is possible. That is to say, current signs are close to the state of piercing, but not yet to the degree of complete piercing.
The receivership represents what legal experts term conservatory measures – actions taken to preserve the status quo pending final determination of rights. The liquidators can investigate and prevent asset transfers but cannot distribute assets to creditors without additional court orders establishing specific rights to those assets.
Cross-Border Enforcement Complexities
The international dimensions of this case present formidable legal challenges. With the trust established under Delaware law and assets potentially spread across multiple jurisdictions, effective enforcement requires sophisticated cross-border judicial cooperation. The success of the receivership ultimately depends on recognition and enforcement in the United States and other relevant jurisdictions.
The offshore family trust structure adds particular complexity to these cross-border proceedings. Huang Lichong (黄立冲) explained that if the trust information is accurate, cross-border debt collection will face issues of legal jurisdiction and procedure. Hong Kong’s receivership and Mareva injunction need to be implemented in the United States, typically relying on Chapter 15 of the US Bankruptcy Code to recognize foreign proceedings or common law comity.
US Trust Law Considerations
Delaware trust law provides robust asset protection features, but these are not absolute. US courts can set aside transfers to trusts if they’re found to be fraudulent conveyances intended to hinder, delay, or defraud creditors. The liquidators have already initiated proceedings in Delaware court seeking to void the US$2.3 billion trust on fraudulent transfer grounds.
Huang Lichong (黄立冲) assessed the probability of successfully voiding the trust in the US: If large capital injections occurred during the debt default and insolvency period, there are obvious channels through related companies and substantive personal control, and litigation is filed within the 4-year plus discovery period window, while obtaining Chapter 15 recognition or equivalent relief, the probability of success can reach medium to high (approximately 40%–60%). If major capital injections predate the window period, and there is solid evidence of trust governance and trustee independence, then the chances of success are not great.
Procedural Hurdles in Asset Recovery
The liquidators face multiple procedural obstacles in their cross-border asset recovery efforts. Evergrande previously withdrew its Chapter 15 bankruptcy application in US courts, meaning the liquidators likely need to reapply for recognition of the Hong Kong liquidation proceedings. Without such recognition, US courts may be reluctant to enforce the Hong Kong receivership order.
Liu Xinyuan (刘馨远) noted that US trust law systems are mature, with various state trust legislation reducing the uncertainty of trust piercing, while also having clear time limits for fraudulent transfers. Piercing is not easy, but there is no conflict between Chinese and US judicial spirit regarding trusts. If sufficient evidence can be provided to prove that Xu Jiayin’s trust assets involve fraudulent transfers and seriously harm the interests of creditors, US courts may similarly recognize and enforce cross-border rulings.
Broader Implications for Wealth Management
The Hong Kong court’s decision carries profound implications for high-net-worth individuals, family offices, and wealth management professionals globally. The ruling serves as a powerful reminder that offshore structures must be established and maintained with strict attention to legal formalities and substantive independence. The case demonstrates that properly structured offshore family trusts remain valid, but their protective features depend on genuine separation of control.
Bai Wenxi (柏文喜), Chief Economist of the China Region at China Enterprise Capital Alliance, emphasized: The safety of trusts is not absolute; the foundation of their effectiveness lies in the independence of the structure and the legality of the establishment purpose. Achieving true asset safety isolation must meet several core prerequisites: the source of trust funds must be legal and clean; the settlor must completely relinquish control; the trustee must have independent and regulated qualifications.
Lessons for Trust Settlors
Wealth owners considering offshore family trust structures should note several critical lessons from this case:
– Source of funds must be demonstrably legitimate and properly documented
– Settlors must genuinely relinquish control over trust assets to independent trustees
– Trust administration must be conducted at arm’s length without settlor interference
– Timing of trust establishment relative to financial difficulties is crucial – transfers during insolvency periods face heightened scrutiny
– Proper governance structures and documentation are essential to withstand legal challenges
Industry Response and Adaptation
Wealth management professionals are already reassessing client structures in light of this ruling. As one wealth management company executive commented: This case may cause concern among some groups, but in fact, there is no place outside the law in the world. The industry is likely to see increased emphasis on compliance reviews, independent trusteeship, and robust documentation to preserve the protective features of offshore structures.
Song Jingyi (宋竟一) believes that such rulings may somewhat weaken the blind superstition about the asset isolation function of trusts and prompt comprehensive upgrades in the compliance review of structures and the standards for preserving evidence of independence when establishing trusts in the future.
Future Developments and Market Impact
The Xu Jiayin offshore family trust case represents just the beginning of what promises to be an extended legal battle with significant ramifications for Chinese offshore wealth structures. The immediate focus remains on the liquidators’ investigation into the full extent and control mechanisms of Xu’s assets. Their findings will determine subsequent legal strategies and potential asset recovery for Evergrande’s creditors.
To date, the liquidation process has recovered modest amounts relative to the massive debt burden. The liquidators reported realizing approximately HK$2 billion (US$255 million) as of July 2025, with about US$167 million actually repatriated. The receivership over Xu’s assets represents a potentially significant avenue for enhanced recoveries, though the process will likely take years to fully resolve.
Regulatory and Judicial Trends
This case occurs against a backdrop of increasing global cooperation in cross-border insolvency proceedings and heightened scrutiny of offshore wealth structures. Regulatory authorities worldwide are strengthening information exchange mechanisms and developing more sophisticated approaches to tracking and recovering assets across jurisdictions.
The practical application of the Chabra jurisdiction in this context may inspire similar approaches in other common law jurisdictions facing complex cross-border asset recovery challenges. The principle that courts will look through formal structures to economic reality is gaining broader acceptance globally.
Investor and Creditor Implications
For investors and creditors involved with Chinese companies with complex offshore structures, this case offers both challenges and opportunities. The demonstrated willingness of courts to penetrate sophisticated offshore arrangements may improve recovery prospects in insolvency situations. However, it also highlights the legal complexities and extended timelines involved in cross-border asset recovery.
The case particularly affects assessment of counterparty risk for companies with significant offshore holdings or complex ownership structures. Creditors may need to enhance their due diligence processes regarding the legal robustness of offshore asset protection arrangements.
Redefining Offshore Wealth Protection
The Hong Kong High Court’s ruling on Xu Jiayin’s assets represents a paradigm shift in how courts approach offshore wealth structures. The decision firmly establishes that offshore arrangements cannot shield assets from legitimate creditor claims when substantive control remains with debtors. While the specific outcome for Xu’s offshore family trust remains uncertain, the case has already reshaped perceptions about the absolute protection such structures provide.
The key takeaway for wealth owners and professionals is that proper trust structuring requires genuine separation of control, legitimate funding sources, and robust independent administration. Offshore family trusts remain valuable tools when properly established and maintained, but they offer no protection for assets tainted by fraudulent transfers or maintained under debtor control. As global regulatory cooperation intensifies, the effectiveness of offshore structures will increasingly depend on their substantive compliance with legal principles rather than their formal complexity.
For investors and professionals monitoring this space, the next critical steps involve tracking the liquidators’ investigation findings, monitoring US court proceedings regarding the trust, and observing how this precedent influences future cross-border insolvency cases. The evolution of this landmark case will continue to define the boundaries of offshore wealth protection for years to come, reminding market participants that in an increasingly interconnected financial world, substance ultimately triumphs over form.