EG LEASING (00379) announced an update regarding the litigation and judicial dissolution proceedings involving Beijing Hengjia and its wholly-owned subsidiary, Hong Kong Hengjia Capital Limited. On February 3, 2026, as part of an arrangement to resolve the dispute concerning Hong Kong Hengjia, the seller (the company's wholly-owned subsidiary, Prosperous Holdings Limited), the buyer (Sheen Nation Holdings Limited), and a guarantor entered into a sale and purchase agreement. Under this agreement, the seller conditionally agreed to sell, and the buyer conditionally agreed to purchase, the sale shares (representing the entire issued share capital of China Hengjia Capital Group Limited) for a consideration of RMB 70 million.
The target company, China Hengjia Capital Group Limited (an indirect wholly-owned subsidiary of the company), is primarily engaged in investment holding, with its equity investments involved in the financial leasing business. The target company indirectly holds approximately 51.39% of the equity interest in Beijing Hengjia, which is classified as an equity investment measured at fair value through other comprehensive income.
The sale group has operated the financial leasing business through its invested company, Beijing Hengjia, which has recorded operating losses for most of the past several years. This performance is mainly attributable to a stricter regulatory framework in China and challenging market conditions. More critically, since August 2023, the company has lost actual control over Beijing Hengjia due to a dispute with its joint venture counterparty in China. This situation resulted in an operational deadlock, which has hampered the Group's ability to manage the business and triggered ongoing litigation.
The directors have considered various options to resolve the situation, including a potential judicial winding-up of the relevant entities. However, the outcome of such proceedings is highly uncertain, could take several years, and would incur substantial legal costs, with no guarantee that the Group would be able to secure corresponding indemnification. The directors have also considered the ongoing litigation initiated by Beijing Hengjia, which demands the Group to fulfill an unpaid capital injection of approximately USD 20 million.
The proposed sale provides an exit opportunity that eliminates the uncertainty associated with the relevant litigation, as the contracting parties have agreed to suspend all disputes, and the Group will no longer be obligated to fulfill the capital injection after the execution of the sale agreement. In light of the sale agreement, the relevant parties have also withdrawn the litigation concerning Hong Kong Hengjia and Beijing Hengjia.
The sale also provides the Group with a clear and immediate exit opportunity to divest a non-core, non-performing asset and utilize the sale proceeds to revitalize its existing businesses. The Board intends to use the proceeds to expand the Group's loan financing and securities investment business in Hong Kong, as well as to bolster the working capital for its distribution business of healthcare and sanitary products and pet products, and its health food manufacturing and sales business.
Furthermore, the disposal will enable management to fully concentrate its resources on the Group's more promising and manageable business lines.