Singapore-listed textile firm Foreland Fabrictech Holdings and one of its units have been ordered by a Chinese court to make payments over a lawsuit regarding a private lending and guarantee agreement amounting to seven million yuan (S$1.4 million).
The firm has been told to pay twice the total amount of any interest charges and fees incurred for late payment of the loan. It must also pay legal costs.
The court in the city of Fujian also said it will impose some expenditure restrictions on Foreland and the unit, Fujian Jinjiang Fulian Knitting Co.
Foreland told the Singapore Exchange (SGX) late on Monday that its current board had not been aware of the loan agreement, which was struck by several parties, including the company, Fujian Jinjiang Fulian Knitting Co, former executive chairman Tsoi Kin Chit and former executive director Cai Fengquan.
The company said it is seeking legal advice and may challenge the guarantee provided in its name, as it said it was not notified of the lawsuit and not given a proper chance to defend itself in court. Foreland added that it is insolvent and is "exploring various options and is in discussion with potential investors".
The firm told the SGX two months ago that it may have lost control of the Fulian unit as Mr Tsoi had been "increasingly reluctant" to cooperate in matters relating to the subsidiary, which he was effectively controlling.
He was publicly reprimanded by the SGX in November 2016. The company lodged a complaint with the Commercial Affairs Department against him, centred on 290 million yuan paid as compensation by Fulian to a customer.
Foreland told the Singapore Exchange late on Monday that its current board had not been aware of the loan agreement, which was struck by several parties, including the company, Fujian Jinjiang Fulian Knitting Co, former executive chairman Tsoi Kin Chit and former executive director Cai Fengquan.
Mr Tsoi stated on May 6 that he would not cooperate or allow Foreland access to Fulian's funds. He also declined to change Fulian's legal representative from himself to executive chairman Yang Meng Yang.
On May 9, Foreland's lawyers in China issued a due diligence report on Fulian. This disclosed a total of 26 court proceedings against the unit. The report also noted that Mr Tsoi's staff at Fulian had omitted mentioning the court proceedings in their financial records, so these proceedings were not included in the auditor's statements.
Foreland said in its May 9 announcement that it will continue to vigorously pursue legal proceedings against Mr Tsoi. Foreland has a net carrying amount in Fulian of 61.1 million yuan as of May 9.
Foreland Fabrictech's shares are suspended from trading on the SGX.