HK court freezes South Beauty founder's assets

London-based private equity firm CVC Capital Partners has won a court order to freeze the assets of Chinese restaurant chain South Beauty chairwoman Zhang Lan. CVC had taken a majority stake last year.

The court order, granted by Hong Kong High Court Justice Andrew Chung on March 6, was directed against Zhang Lan, founder of South Beauty, Grand Lan Holdings Group Ltd, and South Beauty Development Ltd.

CVC Capital, which had acquired an 83 percent stake in Zhang's South Beauty restaurant chain for $300 million yuan last year, confirmed the development to China Daily on Friday and said the freeze order pertains to Zhang's personal assets and does not affect the normal operations of the restaurant chain. The company, however, refused to divulge details on the dispute between two sides. South Beauty's headquarters in Beijing refused to comment on the issue.

According to information made available from the Hong Kong High Court, the two sides are expected to be present in the court again for the next round of hearings scheduled for May 8.

"The court decision looks more like one aimed at property preservation, usually requested by the applicant, based on concerns that the respondents may transfer the assets if the court makes a final ruling in future that is unfavorable to them," said Geng Shuang, chief executive officer of the Guangzhou-based Bestfound Law firm.

Relations between Zhang Lan and CVC Capital are believed to have soured after the deal between the two companies last year. It is quite likely that Zhang Lan did not transfer the stake to CVC Capital on time, or she reneged on the commitments mentioned in the deal, Geng said.

"It is possible that CVC may want the money it invested in the company back. But, there is still a long way to go until the final ruling," she said.

The 57-year-old Zhang rose to fame in China after establishing the South Beauty chain of upscale restaurants that specialize in spicy Sichuan food. The restaurants also used to charge a 15 percent service charge, a rarity in the domestic market.

Zhang was ranked the third-richest in the Hurun rich list for the catering business as early as 2009, with a fortune of about 2.5 billion yuan ($403 million).

After her son's marriage to Taiwan pop star Barbie Hsu, Zhang opened her first restaurant in Taiwan in 2012. Zhang was ranked 589 with 3.1 billion yuan of personal assets on Hurun Rich List 2011. That was also the last time she appeared on the list.