Muchang Group Does Not Accept Esprit'S Claim For Compensation For Breach Of Contract And Intends To "Vigorously Defend"

Recently, Muchang group (01817. HK), the parent company of Chinese men's wear brand GXG, issued an announcement in response to the previous announcement by Wancheng resources (ESPRIT, a fashion retail group in Hong Kong) The letter announcing termination of the joint venture agreement with the group (a subsidiary company indirectly wholly-owned by Esprit global) said that it would not accept any accusations made in the letter and RMB 50 million compensation for breach of contract, and proposed to "vigorously defend" the company's rights under the joint venture agreement and any litigation that Wancheng may bring.

On July 30, Esprit announced the termination of the joint venture agreement with Muchang group and claimed RMB 50 million. The reason is that the group has failed to set up a joint venture so far, thus seriously violating the terms of the joint venture agreement.

The two parties signed the joint venture agreement on December 2, 2019. According to the agreement, the Muchang group has the responsibility to complete the formal establishment of the joint venture company and obtain the business license within 2 months after the signing of the joint venture agreement. Both parties agree to establish joint venture and other joint venture companies in the mainland of China for the purpose of joint venture and other clothing accessories in China.

The registered capital of the joint venture company is RMB 100 million, and Mu Shang Group and Wancheng resources have invested 60 million yuan and 40 million yuan respectively, and hold 60% and 40% of the equity of the joint venture.

In the announcement, Muchang group also said that to the company's disappointment, although the company has been trying to establish a joint venture company, Wancheng sent the letter to the company without any valid and justifiable reasons. The company has no intention to speculate on the reasons behind Wancheng's actions, but insists that the company still complies with the highest standard of its consistent commercial norms and procedures when dealing with Wancheng in connection with the joint venture agreement. He also said that the subject matter of the letter had no material adverse effect on the business operation and financial condition of the company.

According to the 2019 annual report of Muchang group released in May this year, the group said that the joint venture had passed the antitrust review and regarded it as a major investment. It believed that the establishment of a joint venture company to promote and operate the smart brand business by virtue of the group's online and offline channels and flexible supply chain system would help the group further develop its multi brand strategy.

About mushang group

Muchang group is the parent company of Chinese men's wear brand GXG. It was listed on the stock exchange of Hong Kong in May 2019. According to the annual report of 2019, the annual revenue was 3.721 billion yuan, decreased by 1.7% compared with the same period of last year, and the net profit was 208 million yuan, decreased by 44.4% compared with the same period of last year