Annual Report 2021

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 94 The United Laboratories International Holdings Limited Annual Report 2021 10. DISPOSAL OF A SUBSIDIARY (Continued) 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. Given that neither the Group has power over Chengdu Company and exposure or rights to variable returns from its involvement nor has any ability to direct the relevant activities that significantly affect the Chengdu Company’s return, the directors of the Company consider that the Group has lost the control in respect of Chengdu Company and has no significant influence over Chengdu Company for its remaining 33% equity interest and the Transaction is considered as a disposal of the 100% equity interest of Chengdu Company to Evergrande Chengdu on 6 November 2019 (i.e. the date of the Share Subscription) although the Group legally held 33% equity interest of Chengdu Company at 31 December 2019. During the year ended 31 December 2020, (i) the remaining 33% Equity Interest of Chengdu Company has been transferred to Evergrande Chengdu; and (ii) two installments in the aggregate amount of RMB300,000,000 were settled by cash and another installment of RMB237,000,000 has been settled through commercial bills issued by Evergrande Chengdu and guaranteed by Evergrande Real Estate Group Limited that will be matured subsequent to the end of the reporting period. As at 31 December 2020, the outstanding balances in relation to the disposal of a subsidiary comprise (i) the last three installments of the consideration receivables of RMB343,000,000 (equivalents to net carrying amount of RMB263,679,000, after deducting allowance for credit loss of approximately RMB44,709,000); and (ii) the commercial bills receivables of RMB237,000,000 (equivalent to net carrying amount of RMB208,720,000, after deducting allowance for credit loss of approximately RMB35,390,000). During the year ended 31 December 2021, commercial bills receivables of RMB213,905,000 has been received and an impairment loss of approximately RMB5,185,000 has been reversed. As at 31 December 2021, the last three installments of the consideration receivables of RMB343,000,000 is still outstanding. Based on the legal opinion from the PRC lawyer, who is independent and not connected to the Group, the Group can initiate a litigation against Evergrande Chengdu to recover the consideration receivables, after considering various factors, including but not limited to the recoverable amount of the underlying assets, potential transaction cost of recovering the consideration receivables, the financial position and credit risk of Evergrande Chengdu, the management is of the opinion that the last three installments are not probable to recover and, accordingly, has made a full provision for them.