Unexplained personal and business loans to the Duchess of York of more than £500,000 from an entertainment investment company were a “matter for investigation,” a high court judge has been told.

Gate Ventures loaned Sarah Ferguson at least £287,577 personally, and loaned £232,003 to Ginger & Moss, her upmarket tea, dinnerware and jewellery venture, court documents showed.

Gate Ventures, now chaired by the former BBC and ITV boss Lord Grade, is fighting an administrative application by shareholder Zheng Youngxiong, who is owed £2.5m.

The company, which has backed shows including 42nd Street and Sunset Boulevard, wants members’ voluntary liquidation.

But Zheng, known as Quentin, is applying for administrators to be brought in, claiming an investigation is needed into loans and payments, including those to Ferguson, and £4.7m in expenses it is claimed were paid to Gate’s former chairman, the Hong Kong businessman Dr Johnny Hon, who resigned in December 2017.

Ferguson, a former director of Gate Ventures, resigned in December 2019. “There were various transactions with the Duchess of York and entities related to her while she was a director of the company,” Matthew Parfitt, counsel for Zheng, told Judge Prentis.

These included “a direct and unexplained loan of at least £287,577 to her personally”. Parfitt said they were not due to be paid off for some time. “It is certainly a matter for investigation,” he added.

The judge was told there was “strong evidence that directors have breached their duties to the company through negligence and/or by failing to act in good faith … and had sought to exploit the company for their own personal interests”.

Gate’s 3,500 shareholders, most of whom are Chinese, had invested more than £24.5m, but the bulk has been lost and in June 2019 its balance sheet was less than £5m, the court heard. “This is a company that loses money hand over fist,” said Parfitt.

Parfitt said other matters for investigation were the “striking” transactions with Hon. The company paid Hon invoiced expenses of £4,738,174 and was sold investments of £3,834,250, the judge has been told.

“The invoiced expenses are particularly suspect given that they appear to include significant amounts of entertainment spending of no apparent benefit to the company,” the judge heard.

Reading from a long list, Parfitt detailed private jets and lunches with the rich and famous in the US, France and the UK invoiced by Hon, including shopping sprees and meetings with politicians and fashion brands.

The list “beggars belief”, he said. “£4.7m of shareholders’ money that allowed Dr Hon to indulge in jet-setting, high fashion and political meetings”.

The way the directors had sought to explain away the problems “demonstrates a strikingly cavalier attitude to corporate governance,” he added.

The company was unable to pay its lawyers, who quit last week at short notice, nor its auditors, the court heard.

Lord Grade, who succeeded Hon as chairman, has been forced to represent the company in person in the high court proceedings since its legal advisors quit at short notice. The company abandoned a plan to try to raise sufficient funds within the next month to save it.

Gate Ventures was not without value but had a cash flow problem, the court heard. Grade said members’ voluntary liquidation was preferable over administration because the company’s assets were in a particularly specialist field. “We know the market extremely well. We can be of great assistance to dispose of those assets at the right price,” he said.

The company has a claim against Zheng for non-receipt of $10m (£7.9m) that it claims had been raised for the company by Zheng and others on his behalf, but which had not been paid.

There were concerns any administrators appointed by Zheng would not be properly independent, the judge heard.

Parfitt said his client would “welcome” any administrators investigation into the $10m claim, “confident that his position will be vindicated”.

The judge has heard Gate Ventures had an e-commerce venture with Ginger & Moss.

The court heard small investors were persuaded to buy shares after Grade and Ferguson took part a roadshow in east Asia, playing to “packed audiences”.

One such roadshow was in the gambling hotspot of Macau. Grade’s media management credentials were highlighted during his introduction, while the Duchess of York was introduced as the producer of the film Young Victoria, the judge was told.

“It was a chance for people to invest, backed by those at the highest level of British entertainment and British society,” said Edward Davies QC, representing one of the shareholders. Large numbers of small investors put in, and were now asking “where has all the money gone,” he said.

The case was adjourned until Friday.