Breakdown in trust, which triggers liquidation request by minority shareholder, a 'normal disagreement' Tom Group told the Hong Kong stock exchange yesterday that its 60 per cent-held subsidiary Tennis Management was profitable and solvent, after a minority shareholder asked a court in the British Virgin Islands to wind up the company. The Li Ka-shing-controlled company said the suit resulted from a dispute over the distribution of profits. Lincoln Venancio, who owns 40 per cent of Tennis Management through Spectrum International Holding, filed the petition earlier this month. 'While conducting business, it is normal from time to time that disagreements occur between business partners,' Tom said. 'The company has tried everything possible to resolve the agreements amicably.' But court documents suggest relations between Spectrum and Tom have been anything but amicable, with Tom directors allegedly hanging up during conference calls and others refusing to report to Mr Venancio, who serves as Tennis Management's managing director. The liquidation request has little to do with the financial health of Tennis Management, the organiser of the China Open to be held in Beijing in September. Spectrum said in the writ it filed for liquidation because it no longer trusted Tom. Key among its claims is the assertion that Tom deliberately withheld approval of Tennis Management's 2002 audited financial results to deprive Mr Venancio of performance-based compensation. Tom said it had not approved the 2002 books due to its own financial prudence, without explaining the reason for the two-year delay. Another area of dispute is that Tom allegedly misrepresented itself when Tennis Management agreed to assume US$3.5 million in debt from another of Tom's subsidiaries, Swidon. Swidon held a right to organise events for the Women's Tennis Association, which was to accompany the debt transfer. Tom, however, could not make such a transfer without seeking prior approval from the association, which it failed to do. Tennis Management is now left holding US$3.5 million of debt. Spectrum also alleges that Tom in 2003 improperly booked US$10 million in licence revenue from a golfing event and had asked Tennis Management to do the same so the books would coincide. Spectrum said it was inappropriate to book the revenue because the licence fees were payable in 31 instalments and the first two had yet to be paid. There were also questions surrounding the manner in which the deal was drafted. The company said these and other issues had caused a breakdown in trust between Spectrum and Tom, ultimately leading to Spectrum's winding-up petition. Tom expressed surprise at the liquidation request, particularly as Tennis Management has US$3 million in cash. It denied mishandling the US$10 million in licence revenue, saying treatment of the fees was in accordance with Hong Kong accounting standards. The company also blamed Mr Venancio, as managing director of Tennis Management, for the problems with the US$10 million in revenue. 'The managing director ... was fully responsible for initiating, negotiating, signing, executing and collecting on the contract,' Tom said, adding provisions were made in last year's accounts in light of the uncollected revenue. Tom shares dropped 3.87 per cent to 1.49 yesterday. Over the past year, the company's stock has declined 21.16 per cent.