First steps taken in fight to gain control of management at troubled subsidiaries and ultimately recover $808 million The receivers of Shanghai Land Holdings have moved to oust the board and staff of two Shanghai subsidiaries involved in unorthodox loan transactions worth 650 million yuan (HK$603.8 million). The Shanghai Administrative Bureau had acknowledged receipt of applications to 'replace the board of directors and the legal representatives' of Shanghai Hongxin Real Estate Development and Shanghai Yihe Longbai Hotel, receivers Stephen Liu Yiu-keung and Kenneth Yeo Boon Ann of Ernst & Young Transactions said yesterday. While Shanghai authorities will not necessarily give their approval, the move is the first step by the receivers to gain management control over the troubled Shanghai subsidiaries. That would aid their efforts to start mainland court proceedings to recoup as much as 870 million yuan owed to Shanghai Land, according to Mr Yeo. Hongxin and Longbai are indirectly wholly owned by Shanghai Land, which was controlled by Shanghai tycoon Chau Ching-ngai until it went into receivership in June. Chau is being detained by mainland authorities for allegedly falsifying data and for his role in a real-estate scandal in Shanghai. No charges have been laid against him. It is understood that Hongxin's finance and accounting department is run by the same group of people as Shanghai Nongkai Development (Group), Chau's mainland private investment flagship. In July, the receivers revealed that Hongxin and Longbai took out two loans, one of 300 million yuan and the other of 350 million yuan, from Shanghai Rural Credit Co-operatives Union, and put up their own assets as security. About 300 million yuan was lent to a mainland firm, Shanghai Huatip Trading, on May 13 and is still outstanding. The receivers said Shanghai Huatip could be part of Shanghai Nongkai, as 'it appears that two individuals who claim to be employees of the Nongkai Group may be shareholders of Shanghai Huatip'. Longbai deposited all but three million yuan of its 350 million yuan loan at Fuyou Securities. However, the receivers said Fuyou Securities had not disclosed 'the current whereabouts' of the deposit. Chau controlled the Shanghai-based brokerage until June, when Citic Securities took it over at the government's request. The receivers questioned the validity of the two loans, which were borrowed without the approval of Shanghai Land's board. Meanwhile, the receivers are still recouping US$34.2 million from Chau and his wife and business partner Mo Yuk-ping - for funds that had been transferred from the company's accounts to others 'for their own use'. In Hong Kong, Mo and about a score of suspects were arrested during an Independent Commission Against Corruption investigation. No charges have been laid so far. Of the US$34.2 million, about 220 million yuan was advanced to a mainland company. Meanwhile, Yue Jialin, the buyer of Chau's 63.19 per cent stake in Shanghai Merchants Holdings, which was part of his locally listed empire, has taken court action to discharge the receivership of Shanghai Merchants. The summons would be heard in the High Court on December 3, the company said yesterday.