A recent report by Chinese blog iFeng has revealed that judicial proceedings towards obtaining bankruptcy protection for Chinese smartphone maker Gionee are moving forward due to a ruling from Shenzen intermediate people’s court. Sources familiar with the case hint that the proceedings will lead to a complete overhaul of the company.
Gionee’s financial woes is traced to huge debt incurred as a result of the gambling and extravagant spending problems of the company’s founder and chairman Liu Lirong. The present case at the court is as a result of the filed bankruptcy liquidation application by Huaxing bank against the company. The case also extends from the financial problems the company had in year 2017. The company’s chairman recently admitted to having gambling aaddiction.Company executives later disclosed details of the founder’s gambling activities stating that as much as $143.8 million of the total $2.45 billion in the company’s debt was as a result of his gambling. This is the money owed to an approximate 648 creditors. Mr. Liu Lirong extravagant spending may parallel to an amount closer to $1 billion according to a region report. While the chairman refuted the assertion, it has led to further hypothesis that gambling is not the only reason behind the missing money.
Some unsubstantiated claims have indicated that the money was deliberately ‘lost at the casino’ so as to channel the money outside China for Mr. Liu Lirong’s personal use. Allegations from this claims could result to further problems for both the founder and the
company, if there is any proof to confirm them. To avoid liquidation in reference to the case in court, Gionee has recently employed some restructuring expert. The chairman has given some hope that there will be resolution in the
next few years. However, if there is any claims for more recent accusations against Mr. Liu Lirong then there is
every tendency Gionee will be liquidated in order to pay back debtors. It’s more likely that the chairman will be forced to resign, since reorganization of the company seems to be the likely outcome.
(source)
