Zhang Lan was exposed to overseas debt of 980 mill

Original title: Zhang Lan is exposed to overseas debt of 980 million? Latest response

Zhang Lan, the 65-year-old founder of South Beauty,

Previously, due to frequent live streaming of goods on the hot search,

Recently, it has been a bit rough.

First, her "Maliuji" hot and sour powder was directly named and criticized by the March 15 special report team of China Food Safety News for containing more than 20 additives, including aluminum ammonium sulfate similar to alum. Excessive consumption can easily cause Alzheimer's disease, memory loss, intellectual decline, and other conditions.

Subsequently, Zhang Lan was recently revealed to have a huge amount of debt owed abroad, and the luxury houses under her name were also executed. This matter rushed into a hot search this morning.

According to media reports on the 19th, according to the judgment recently released by the United States Federal District Court, Zhang Lan still owes CVC Fund 142 million US dollars (approximately 980 million yuan) and its interest. Zhang Lan's overseas family trust has been breached, and a New York apartment purchased with the family trust fund is also about to be repaid, causing heated debate.

Once the news spread, the asset protection function of family trusts was also questioned. Why are overseas family trusts broken down? Is there any possibility of breakdown of domestic family trusts? Is family trust reliable for asset protection?

The so-called family trust, according to the "Notice on Regulating the Classification of Trust Business by Trust Companies (Draft for Comments)", refers to the trust companies accepting the entrustment of a single natural person, or accepting the entrustment of a single natural person and their relatives, with the main trust purpose of protecting, inheriting, and managing family wealth, providing property planning, risk isolation, asset allocation, children's education, family governance Customized affairs management and financial services such as public welfare (charity) undertakings. The paid-in trust of a family trust shall not be less than 10 million yuan. The beneficiary shall be the trustor or his relatives, as well as charitable trusts or charitable organizations, but the trustor shall not be the sole beneficiary.

In response to an overseas debt of 980 million yuan, Zhang Lan said that she was calculated by capital and did not owe anyone. In her autobiography, she described the dispute.

Zhang Lan responded with an overseas debt of 980 million yuan:

Calculated by capital, not owed to anyone

Recently, the United States Federal District Court released a civil lawsuit ruling between La Dolce Vita Fine Dining Company Limited and Zhang Lan, ruling that the proceeds from the sale of the 39A apartment at 20 West 53rd Street, New York, owned by Zhang Lan and her company, belong to Sweet Life Food Co., Ltd. "Sweet Life Gourmet Co., Ltd. was actually established by CVC to acquire South Beauty. The judgment also revealed that Zhang Lan lost the lawsuit against CVC in 2019, and owed the other party a total of 142 million US dollars (approximately 980 million yuan) and interest.".

In addition to obtaining funds for the New York apartment, CVC also targeted Zhang Lan's family trust to recover the arrears.

On November 2, 2022, a judge of the High Court of Singapore determined that Zhang Lan was the actual owner of the assets in the bank account of the trust, and therefore agreed to CVC's application for the appointment of a receiver. In other words, the family trust property is recognized as Zhang Lan's personal property, so Zhang Lan's creditor CVC can apply for corresponding enforcement measures against this fund.

The grudge between Zhang Lan and CVC starts with the failure of South Beauty's listing.

Zhang Lan founded the South Beauty brand restaurant in 2000. In order to realize the listing dream, in 2008, South Beauty received a capital injection of 200 million yuan from CDH Venture Capital. Until 2011, South Beauty did not sprint for A-shares, but it failed. After that, it still failed to move to Hong Kong for listing.

As South Beauty originally signed a gambling agreement with CDH, CDH requested Zhang Lan to buy back the shares at a high price. Zhang Lan had no money to perform until CVC appeared. In 2014, CVC acquired 82.7% of South Beauty's equity. At this time, Zhang Lan's shareholding was changed to 13.8%, and the employee's shareholding was 3.5%.

In 2014, CVC Fund borrowed money to pay about 250 million US dollars (about 1.6 billion yuan) to Zhang Lan's bank account in order to acquire the equity of South Beauty.

Due to the fact that CVC also borrowed funds for the acquisition of South Beauty, and under the pressure of syndicated loans, in 2015 CVC transferred all of South Beauty's equity to Hong Kong Baohua Co., Ltd., Zhang Lan also followed suit and lost her minority equity in South Beauty. In July 2015, the appointed representative of CVC and Zhang Lan ceased to serve as members of the Board of Directors of South Beauty, and Zhang Lan completely lost control of South Beauty.

The conflict between CVC Fund and Zhang Lan has been escalating, and the two sides have filed a trade arbitration lawsuit. In April 2019, Zhang Lan lost an arbitration lawsuit and was sentenced to pay $142 million and interest to the CVC Fund.

During this period, Zhang Lan, who was aware of the operational risks of South Beauty, established a family trust shell company, Success Elegant Trading Limited ("SETL") in the British Virgin Islands in February 2014 in order to achieve property preservation and inheritance. In June of the same year, she established the Offshore Trust, The Success Elegant Trust, with the beneficiaries of her son Wang Xiaofei and their children, and the custodian being Asia Trust Limited.

SETL has opened bank accounts with Credit Suisse and Deutsche Bank (hereinafter collectively referred to as "the two bank accounts").

After receiving the transfer from CVC, Zhang Lan quickly transferred $142 million in cash and securities to his family trust shell company SETL, and later transferred $85 million of that to SETL's account at Deutsche Bank.

Currently, SETL has approximately $22 million and $33 million in assets in its accounts with Credit Suisse and Deutsche Bank, respectively. In March 2015, CVC obtained property freezing orders against Zhang Lan from Hong Kong courts and Singapore courts, and two bank accounts under SETL's name were frozen. CVC's reason is that the whereabouts of the large amount of funds paid to South Beauty are unknown.

Then, CVC filed an arbitration against Zhang Lan, who lost. CVC first obtained the support of the Hong Kong court with this ruling. Later, CVC went to Singapore and targeted two bank accounts in the Zhang Lan family trust structure. The Singapore court heard CVC's application for the appointment of a receiver and delivered a judgment on November 2, 2022. It was this judgment that exposed Zhang Lan's unknown family trust.

On March 18th, the reporter noticed that Zhang Lan held up her own brand of cold noodles during the live broadcast and responded to a question from fans by swiping the screen, saying that debt was calculated by capital, "I didn't calculate others, so I didn't lose face. This shows that I did well, and when pigs fattened, wolves came. It was the CVC fund that owed me, and I didn't owe anyone, how could I bow to the evil forces."

In response, Zhang Lan did not forget to bring goods for his published autobiography, saying that his dispute with the CVC Fund was clearly described in the book, and the specific situation would not be discussed in the live broadcast room.

Just three weeks ago, Zhang Lan appeared at the 35th Beijing Book Ordering Conference with her new book "My Nine Lives.". She confessed on the spot that it was not easy to come to this day, all with one breath in her heart.

Many fans in the review area expressed their support for Zhang Lan, believing that she had been entrepreneurial for decades and was very inspirational to bring live videos every day. However, there are also many netizens who believe that "it is natural for CVC to repay its debts. If CVC doesn't get the money back, it will almost go bankrupt. Zhang Lan always feels that it is someone else's fault."

Why was the trust of Zhang Lan's family broken down?

The important advantage of family trusts has always been that the settlor can use the independence of the trust assets to isolate risks, thereby avoiding the division of family property issues that arise from the settlor's business risks and marital risks. Family trusts are also favored by high net worth customer groups due to their risk isolation function.

Curiously, why did Zhang Lan's offshore family trust fail to perform the "risk isolation" function?

According to the judgment of the High Court of Singapore, the judge determined that Zhang Lan was the actual obligee of funds under the family trust, mainly based on the following reasons:

First, after the establishment of the family trust, Zhang Lan can still freely transfer funds from her bank account for herself.

Secondly, before receiving the freezing order notice from Hong Kong, China, and the freezing order from Singapore, Zhang Lan was eager to transfer funds under the family trust.

The judgment adopted the term "apparent unfettered operation". Specifically, the first evidence was that in September 2014 and February 2015, Zhang Lan directly requested Credit Suisse Bank to transfer US $3 million twice without specifying the reasons; The second evidence is that there was a transfer of funds from the Deutsche Bank account on November 26, 2014, which was ultimately traced back to the purchase of the aforementioned apartment in New York.

Thirdly, Zhang Lan's agent explicitly mentioned in an email sent to the bank where the funds under the family trust are located that the relevant bank accounts under the family trust are owned by Zhang Lan, "And required to be promptly informed of changes in the assets of the account."

[P] Accordingly, the Singapore High Court held that although the funds were in the name of the family trust, Zhang Lan was the actual owner of such funds, and that Zhang Lan established the family trust to avoid the execution or claims of creditors on the property under his name.

[P] " 。 The official website of Zhonglun Wende Law Firm stated that throughout the discussion process of the court's judgment, the core of whether a family trust will be breached by the court lies in whether the actual owner of the property under the family trust is the settlor, and this issue is essentially a judgment on the effectiveness of the family trust.

For an effectively established family trust, it should have the function of asset isolation, that is, after the trustor converts its property into trust property through a family trust, the trust property will be independent of the inherent property of the trustor, trustee, and beneficiary. Therefore, even if the trustor, trustee, or beneficiary is unable to repay their debts, the trust property does not belong to their responsible property, and creditors have no right to apply to the court to directly take property preservation measures or other enforcement measures against the trust property.

On the contrary, if a family trust is invalid or revoked according to law, there should naturally be no corresponding trust property, that is, the property under the family trust is still the personal property of the trustor in essence, and the creditors of the trustor have the right to apply to the court to take corresponding property preservation and enforcement measures against such property, thereby failing to exert the asset isolation function of the family trust.

Zhang Qiang, a senior partner of Beijing Weiheng Law Firm, also stated in an interview with a reporter on WeChat that the actual owner of the property under this family trust is the settlor, not the custodian, and is not actually a family trust. "An effective family trust with asset isolation functions. After the trustor converts its property into trust property, the trust property will be independent of the inherent property of the trustor, trustee, and beneficiary."

The reporter interviewed Lawyer Wang Xu (TEP), Executive Director of the Family Office Law Center of Dacheng Law Firm. He believed that the issue of trust breakdown should be viewed from two levels.

At the legal design level, when the trustor retains too much control over the trust property in the trust contract or trust structure, and the retention of rights results in the trust property being able to be freely controlled by the trustor, the possibility of the trust being "broken down" will significantly increase.

At the practical level, even if the settlor of a family trust does not retain too many rights on the surface, if all the instructions given by the settlor are strictly executed by the trustee "without thinking", this situation may be a material false trust, and its asset protection function may also be affected.

"This trust may have problems at both levels. From the perspective of legal design, she served as a director in SETL, had the right to control the company's property, and there may be many rights reserved factors in the design of her trust contract. On the practical level, she was the signatory of a SETL bank account, and had used funds under the trust to purchase real estate. During the operation of the trust, her lawyer also sent an email to the bank stating that the account was in use." Maintained by Zhang Lan. "From the perspective of public information, there are certain problems with this family trust, both from the legal and practical aspects, and it has a 'gene' that can be punctured." Wang Xu said so.

Netizens comment on

Source: Qianjiang Evening News Comprehensive Daily Economic News, Shanghai Securities News, Xinmin Weekly, 21st Century Economic Report, netizen review

The copyright belongs to the original author. If there is any infringement, please contact us at ID: samf727

Editor: Xuan Xueting

Editor in charge: Yu Yang

Reviewed by: Zhou Xiaoling

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