According to Zhitong Finance App, China Health Group (00673) issued an announcement. On September 12, 2024, the company (as plaintiff) filed an indictment dated August 1, 2024 (this indictment) against the People's Government of Shuangluan District of Chengde City (as defendant 1) and Chengde Shuangluan District People's Hospital (Chengde Psychiatric Hospital) (as defendant 2, together with the defendant, the “two defendants”) was accepted and filed by the Chengde Intermediate People's Court of Hebei Province.

According to the indictment, the cause of this case was a contract dispute. The facts and reasons are as follows:

1. The company and Defendant 1 and Beijing Zhongwei Kanghong Hospital Management Co., Ltd. signed the “Chengde Shuangluan District People's Hospital Cooperative Operation Agreement” and related supplementary agreement (the agreement) on July 23, 2015, agreeing that the parties would adopt the “debt+ entrustment management” model and cooperate to jointly construct Defendant 2, and commence and complete the stock reform when conditions are ripe. Prior to the stock reform, Defendant 2 maintained the functions of a public hospital after completion, and the assets were also state-owned assets.

2. After the agreement was signed, the company provided Defendant 1 with a loan of RMB 67.6 million (the “principal amount of the loan”) in accordance with the agreement.

3. Later, due to changes in national policy, the agreement could not continue to be implemented. After friendly negotiations, the company and the defendant signed an “Agreement” (“Cancellation Agreement”) on April 30, 2021, and agreed to cancel the agreement. According to the cancellation agreement, the defendant should return the principal amount of the loan to the company and calculate interest based on an annual interest rate of 7%. The interest accrual period is from the date each loan is actually paid until February 28, 2021. The defendant promised to be repaid in two installments.

4. However, after signing the cancellation agreement, Defendant 1 was unable to fulfill the repayment obligation in accordance with the contract. After repeated reminders from the company, on June 21, 2022, the defendant issued a “Letter of Commitment” (“Letter of Commitment”) to the company, confirming and agreeing to repay the balance of the amount owed by the company up to the date the letter of commitment was issued, RMB 47.158 million. Defendant 1 also issued a repayment plan in the letter of commitment: repayment of RMB 0.5 million at the end of June 2022, repayment of RMB 1 million at the end of July 2022, repayment of RMB 2.5 million at the end of August 2022, and repayment of RMB 43.158 million at the end of September 2022. The company acknowledged this. Subsequently, in June 2022, the defendant repaid RMB 0.5 million to the company. Since then, payments have not continued according to the repayment schedule.

5. Since June 2022, the company has sent several reminders to Defendant 1, and later sent someone to negotiate repayment matters with Defendant 1 in May 2024. As soon as the defendant fully confirmed his repayment obligation, he also voluntarily stated that the district government was willing to repay, and had specific discussions with the parties on the repayment method. In July 2024, the defendant made another repayment of RMB 0.2 million to the company.

6. As of the date of the indictment, Defendant 1 was still unable to pay off all of its arrears.

According to the lawsuit, the company's lawsuit claims are as follows:

1. According to law, the two defendants were ordered to jointly repay the principal amount of the outstanding amount of RMB 50.9868 million to the company and pay interest to the company, which is tentatively RMB 8.0907 million (based on RMB 67.6 million yuan, calculated at an annualized interest rate of 7% agreed in the contract, from March 1, 2021 to July 31, 2024, and continued until the date of full payment of principal and interest); the total amount above is RMB 59.0774 million.

2. The costs of litigation in this case were borne by the two defendants.