Notes to Fina - 星島新聞集團

ncial Statements
19. INVESTMENT IN AN UNCONSOLIDATED SUBSIDIARY
(continued)
19.
Pursuant to the Agreement, the vendors are responsible,
inter alia, to procure for the appointment of the
Company’s representatives as directors of Sichuan
Allday. However, up to the date of approval of these
financial statements, the vendors have not been able
to honour their obligations under the Agreement,
including significantly the obligations relating to the
appointment of directors representing Artland, and
hence the Company, in Sichuan Allday. As a result, the
Group has been unable either to participate in the
management of its investment, or to obtain any
financial information of Sichuan Allday. Against this
background, the directors consider that in substance
the Group is unable to exercise effective control over
its investment as a whole and, accordingly, have
accounted for Artland as an unconsolidated subsidiary.
Although the Group had resumed discussion with the
PRC joint venture partner of Sichuan Allday, up to the
date of approval of these financial statements, the
Group had not been able to achieve any progress on
the discussion of cooperation. The Group has
commenced a legal action against the vendors during
the year for rescission of the Agreement made between
the parties and/or damages to be assessed. The vendors
then put forward a counterclaim against the Group for
the remaining consideration of HK$18,000,000.
According to a legal opinion, the Group has a good
arguable case against the counterclaim. However, as
the legal action is at its early stage and its outcome is
uncertain, the directors consider that it is prudent to
continue to carry a full provision of HK$36,000,000
against the Group’s interest in Artland.
18,000,000
36,000,000
Global China Group Holdings Limited Annual Report 2002
109