Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 89 The United Laboratories International Holdings Limited Annual Report 2020 10. DISPOSAL OF A SUBSIDIARY On 7 August 2019, The United Laboratories Limited, a wholly-owned subsidiary of the Company, and Evergrande Chengdu, an independent third party, entered into an investment and cooperation agreement (the “Agreement”). Pursuant to the terms of the Agreement, (1) Evergrande Chengdu has agreed to subscribe for 67% equity interest of Chengdu Company (the “Share Subscription”), an indirect wholly-owned subsidiary of the Company by way of a capital injection for a consideration of approximately RMB812,121,000 (the “Consideration for 67% Equity Interest”), and (2) the Group has agreed to transfer the remaining 33% equity interest of Chengdu Company to Evergrande Chengdu for a consideration of approximately RMB217,879,000 (the “Consideration for 33% Equity Interest”) (in which RMB50,000,000 will be deducted if the necessary consents and approvals for the adjustments of plot ratio of the land (the “Land”) stipulated in the Agreement cannot be obtained from the government within the specific period) after the fifth installment of the total consideration (the “Transaction”). The total consideration of the Transaction is approximately RMB1,030,000,000 and will be settled in seven installments within 27 months from the date of disposal. The seventh installments of RMB171,500,000 shall be settled by way of receiving certain commercial properties developed on the Land from Evergrande Chengdu. If transfer of such properties cannot be effected within the specified period, such amount shall be settled in cash. Subsequent to the date of the Agreement, the Group has been informed by the government that the adjustments of plot ratio of the Land stipulated in the Agreement were not approved, and therefore, the Consideration for 33% Equity Interest of Chengdu Company has been adjusted from RMB217,879,000 to RMB167,879,000. The total consideration of the Transaction is therefore adjusted to RMB980,000,000 which will be settled in seven installments within 27 months from the date of disposal. During the year ended 31 December 2019, the registered share capital of Chengdu Company has been increased from RMB400,000,000 to RMB1,212,121,000 upon the Share Subscription and 67% of equity interest of Chengdu Company has been legally transferred to Evergrande Chengdu. The board of directors of Chengdu Company after the Share Subscription consists of three directors, of which one is appointed by the Group and the rest of the directors are appointed by Evergrande Chengdu. Pursuant to the terms of the Agreement, the fiduciary duty of the director of Chengdu Company representing the Group (the “CD Director”) is only limited to monitor the settlement of the Consideration for 67% Equity Interest upon capital injection from Evergrande Chengdu to Chengdu Company and the subsequent settlement of Consideration for 33% Equity Interest of Chengdu Company. In addition, the CD Director do not have existing rights that give it the current ability to direct the relevant activities that significantly affect the Chengdu Company’s returns and the Group is not entitled to share any profit or loss recognised by Chengdu Company and net assets of Chengdu Company after the Share Subscription.