A Hong Kong court is set to hear arguments on whether a deal that established a fund to compensate China Evergrande minority shareholders is valid. The legal challenge pits the property developer's liquidators against the city's securities watchdog in a case that could determine recovery prospects for thousands of investors.

The compensation arrangement was created as part of a broader restructuring effort following Evergrande's default on its massive debt obligations. Minority shareholders, who suffered significant losses when the company's shares plummeted, were promised payouts through this dedicated fund mechanism.

Liquidators appointed to oversee Evergrande's winding-up proceedings are now contesting the watchdog's approval of the deal. They argue the arrangement may not adequately protect creditor interests or comply with applicable insolvency laws. The Securities and Futures Commission defended its endorsement, stating the fund provides a structured pathway for shareholder compensation.

The court's ruling will have significant implications for Evergrande's ongoing liquidation process and could set a precedent for how minority shareholders are treated in future Chinese corporate restructurings involving cross-border listings.