PricewaterhouseCoopers (PwC) partners in Hong Kong are set to miss sizeable payouts after the company chose to retain money from a previous business sale, weeks after being hit with sanctions over its Evergrande audits.
An email to retired partners, seen by the Financial Times (FT), said proceeds from the 2022 disposal of a business unit would now be held for the “operations and investments” of the company, rather than distributed to those who were partners in Hong Kong at the time.
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The change comes after PwC agreed to pay HK$1.3bn in fines and compensation over its work on China Evergrande’s accounts.
Hong Kong’s Securities and Futures Commission ruled that PwC should compensate shareholders after it had “actively acquiesced to manipulation by China Evergrande” and failed to properly verify the group’s records during 2019 and 2020 audits.
The Evergrande affair has weighed heavily on PwC’s China operations, costing it clients on the mainland and prompting litigation from the liquidators of Evergrande’s Hong Kong-listed parent, which are seeking to recover further sums for investors.
The disputed payouts relate to the $2.2bn raised from PwC’s 2022 sale of its global mobility business, which advised multinationals on tax and immigration matters for relocating staff. The unit was sold to US private equity firm Clayton Dubilier & Rice.
Hong Kong partners had been told they would receive a share of those proceeds over five years, with individual allocations often running to several hundred thousand Hong Kong dollars.
According to the email, distributions will now cease after three years. It also noted that management had always retained discretion over whether to make the payments.
Proceeds not yet released to equity partners “will not vest” and “will revert to be used in the operations and investments” of the company, PwC China CFO River Zhang wrote in the message to retired partners.
In a statement to the FT, PwC said: “We do not comment on internal financial matters. We are fully committed to managing our business to deliver high-quality services and invest for the future.”
