Birmingham City parent company, Birmingham International Holdings Limited, is being sued over the alleged non-repayment of a series of loans made by a Chinese energy company.
BIHL is said to owe almost £4 million to China Water Industry Group Limited after the loans were made by its subsidiary, iMerchants.
Two further loans were also allegedly made to a subsidiary of BIHL without the knowledge or permission of the energy company’s full board of directors.
China Water announced to the Hong Kong Stock Exchange that it is now planning to take legal action against BIHL to recover repayments which are seven months overdue.
The notice issued to the stock exchange said: “During the period from August 2009 to January 2011, the company or its subsidiaries has made various BIHL Loans.
‘‘During the period when iMerchants was a subsidiary of the Company, a subsidiary of iMerchants made the iMerchants Loans to a subsidiary of BIHL.”
Almost six million Hong Kong dollars (£495,000) has been repaid by BIHL, but the China Water Industry Group has served notice that it intends to take action to recover the remaining money, which amounts to almost £4 million.
The statement from the energy firm said it had been pushing for repayment but doubted if any return would be forthcoming because of the continued suspension of BIHL shares.
It also expressed doubts about BIHL’s ability to fund any further payments despite repeated demands and the uncertain situation surrounding Carson Yeung, because of his impending court case on money laundering allegations.
The statement added that the board of the energy group had agreed to the loans initially because it thought that the deals could strengthen its relationship with Carson Yeung and BIHL and capitalise on “his extensive business connections and identify business opportunities in China”.
Last month it was announced to the Hong Kong markets that iMerchants wrote off another loan made to SMI Publishing, which was allegedly guaranteed by Carson Yeung.