Re ING Securities (Japan) Ltd

• Jurisdiction: Cayman Islands
• Judge: (Levers, J.)
• Judgment Date: 08 April 2005
• Court: Grand Court (Cayman Islands)
• Date: 08 April 2005

Grand Court

(Levers, J.)

IN THE MATTER OF ING SECURITIES (JAPAN) LIMITED

C.D. McKie for the petitioner.

Cases cited:

(1) Great Universal Stores Ltd., In re, [1960] 1 W.L.R. 78; [1960] 1 All E.R. 252, applied.

(2) Jupiter House Invs. (Cambridge) Ltd., In re, WLR[1985] 1 W.L.R. 975; [1985] BCLC 222, referred to.

(3) Thorn EMI Plc., Re, [1989] BCLC 612; [1988] BCC 698, applied.

(4) Wallasey Brick & Land Co. Ltd., ReUNK(1894), 70 L.T. 870; 63 L.J. Ch. 415, distinguished.

Legislation construed:

Companies Law (2004 Revision) (Laws of the Cayman Islands, 1963, cap. 22, revised 2004), s.16: The relevant terms of this section are set out at para. 23.

Companies-reduction of share capital-confirmation by court-under Companies Law (2004 Revision), s.16, reduction in share capital confirmed if for discernible purpose and proposals properly explained, shareholders treated equitably and creditors safeguarded-not necessary for company still to be trading

The petitioner sought an order under s.16 of the Companies Law (2004 Revision) confirming a reduction of share capital of the company.

The company, whose registered head office was in the Cayman Islands, engaged mainly in equity securities broking in Tokyo. It ceased operations in 2004, notifying all of its previous clients, and placed a public notice in the National Gazette in Japan. The company had substantial operating losses which, as it had ceased operating, were not recoverable. As a result, part of the paid-up capital of the company was permanently lost and no longer represented by the available assets. The purpose of the reduction of share capital was therefore to bring the company”s paid-up share capital into line with its net assets. Such reduction, which would also substantially reduce the company”s capital tax liability under the new tax regime proposed in Japan, was permitted by the company”s articles of association.

The proposed reduction did not involve the diminution of any liability regarding unpaid capital nor the repayment to shareholders of any paid-up capital. It was unlikely that the company had any outstanding liabilities, but if there were the company would be able to meet any obligations out of the net assets after the capital reduction. Notice of the hearing of the petition was ordered to be published in the Cayman Islands Gazette, and in Kampo in Japanese. Kampo refused to publish it as it contained information extraneous to that required by Japanese law, and a more limited announcement was therefore published in Kampo and a full notice of petition in a mass circulation newspaper read by Japanese business people.

The petitioner submitted that the directors were satisfied that (a) the losses to be set off against the capital of the company were permanent, therefore the company”s capital ought to be reduced by an appropriate amount; and (b) the relief sought by the petition was for the benefit of the company and ought to be granted.

Held, confirming the reduction in share capital:

(1) The court would make an order under s.16 of the Companies Law confirming the reduction of share capital, as the shareholders were being treated equitably, the reduction proposals were properly explained, the creditors were safeguarded and the reduction was for a discernible purpose. The fact that the company was no longer trading did not preclude the court from confirming the reduction of share capital (para. 22; para. 24; para. 26; para. 28).

(2) The purpose of the order requiring the publication of notice of the hearing of the petition was sufficiently complied with by a limited announcement in the specified publication and a full notice of petition in a mass circulation newspaper read by Japanese business people (para. 27).

1 LEVERS, J.: The petitioner petitions the Grand Court of the Cayman Islands seeking an order of this court pursuant to s.16 of the Companies Law (2004 Revision) confirming a reduction of the capital of the company.

Background

2 The evidence before me is that the company was incorporated as Baring Far East Securities Ltd. on February 26th, 1985, and registered on February 27th, 1985, as a company limited by shares. For various reasons, the company had changes of names culminating on April 2nd, 2002 as ING Securities (Japan) Ltd.

3 The registered office of the company is situated and has been situated at Maples & Calder Corporate Services Ltd., Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands since February 7th, 2004. The principal place of business of the company is at

The New Otani Garden Court, 4–1 Kioi-cho, Chiyoda-ku, Tokyo 102-0094, Japan.

4 The company was established to carry on the business of stockbroking and/or dealing with securities on its behalf and on behalf of others, and to carry out the other objects set out in the memorandum of association of the company. It was, since incorporation, principally engaged in the business of equity securities broking. Since July 30th, 2004, however, the company has ceased all operating activities and is, therefore...