Debt-ridden Chinese property giant Evergrande has been ordered to liquidate by a court in Hong Kong.
Judge Linda Chan said "enough is enough" after the property giant failed to come up with a restructuring proposal.
Evergrande has been the poster child of China's real estate crisis with over $325bn (£256bn) of liabilities.
When Evergrande defaulted two years ago it sent shockwaves through global financial markets.
The decision is likely to send ripples through China's financial markets at a time when authorities are trying to curb a stock market sell-off.
Evergrande shares fell by more than 20% in Hong Kong after the announcement. Trading in the shares has now been suspended.
China's property sector contributes roughly a quarter of the world's second biggest economy.
Liquidation is a process where a company's assets are seized and sold off. The proceeds can then be used to repay outstanding debts.
However, whether this process is followed may depend on the Chinese government and the liquidation order does not necessarily mean that Evergrande will go bust and collapse.
The case was brought by one of its investors, Hong Kong-based Top Shine Global, in June 2022 which said that Evergrande had not honoured an agreement to buy back shares.
But what they owed is a fraction of Evergrande's total debts.
The vast majority of the money it owes is to lenders in mainland China who have limited legal avenues to demand their money.
Foreign creditors, in contrast, are free to bring cases to court outside mainland China and some have chosen Hong Kong, where Evergrande and other developers are listed, to bring lawsuits against them.
Following the making of a winding up order, the companies' directors will cease to have control.
A provisional liquidator - either a government employee or a partner from a professional firm - will likely be appointed by the court, according to Derek Lai, the global insolvency leader at Deloitte.
After meetings with creditors, the formal liquidator will be appointed within several months.
But most of Evergrande's assets are in mainland China and despite the "one country, two systems" slogan, there are thorny jurisdictional issues.
There is an agreement between the courts of China and Hong Kong to recognise the appointment of liquidators but Mr Lai says that as far as he is aware, "only two out of six applications" have been recognised by courts of three pilot areas in mainland China.
The Chinese Communist Party also seems eager to keep developers afloat to make sure that ordinary homebuyers who bought property even before building work began get what they paid for.
That means Beijing could choose to shrug off the Hong Kong court order.
"Even if the appointed liquidator is mutually recognised in Hong Kong and mainland China, he or she would need to follow the laws of mainland China when conducting approved liquidation-related matters there," Mr Lai adds.
The liquidation order against the parent company does not mean an immediate suspension of Evergrande's construction work, either.
"This does not place all of the subsidiaries into liquidation," says Nigel Trayers, managing director of restructuring at Grant Thornton, adding that liquidators may seek to take control of certain subsidiaries after conducting investigations.
"But they would need to do this by either seeking to place the subsidiaries into liquidation or by appointing themselves as directors of those subsidiaries," he adds.
"In doing this, they will need to move through the corporate structure layer by layer and there may be certain challenges in doing this in practice."
Mr Lai points out that despite the liquidation order, "if a company is insolvent, it is not likely that unsecured creditors would recover the full amount of their claims".
Foreign creditors would also unlikely get their hands on their money before mainland creditors do.
Even if Judge Chan's orders are not carried out in China, it would send a strong message and give us a clue on what other developers and creditors may face.
She presides over not just Evergrande, but also other defaulted developers such as Sunac China, Jiayuan and Kaisa.
Last May, she ordered the liquidation of Jiayuan after its lawyers failed to explain why they needed more time to iron out their debt restructuring proposal.
"How an offshore liquidator would be treated by onshore stakeholders when there are significant local creditors and considerations at play remains to be seen," says Daniel Margulies, a partner at Dechert in Hong Kong who specialises in restructuring matters in Asia.
Evergrande has been working on a new repayment plan but in August last year, it filed for bankruptcy in the US in a bid to protect its American assets as it worked on a deal.
The following month, its chairman Hui Ka Yan was put under police surveillance.
Source: BBC