Re a Request for International Judicial Assistance in Respect of Winding up Proceedings Pending in the High Court of the Hong Kong Special Administrative Region
| Jurisdiction | Cayman Islands |
| Judge | Segal |
| Judgment Date | 19 September 2017 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD 157 OF 2017 (NSJ) |
| Date | 19 September 2017 |
The Hon. Justice Segal
CAUSE NO: FSD 157 OF 2017 (NSJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Application for recognition and assistance at common law by foreign liquidators — Hong Kong liquidators of Cayman company seeking an order from the Cayman Court permitting them to apply in Cayman for a Cayman scheme to be approved and sanctioned in parallel with a Hong Kong scheme — approach of the Court to requests for assistance at common law by a liquidator appointed in a place other than the country of incorporation of the company concerned
For the Liquidators: Ms Clare Stanley QC with Shaun Maloney of Ogier
The application, the relief sought and a summary of the orders to be made
I have before me an ex parte summons (the Summons) issued by the Hong Kong liquidators of a Cayman company, China Agrotech Holdings Limited (the Company). In the Summons the Hong Kong liquidators seek orders from this Court giving them certain powers and the authority to act on behalf of the Company for the limited purpose of presenting a petition for a scheme of arrangement between the Company and its creditors in Cayman as part of a corporate rescue of the Company involving a parallel scheme of arrangement with creditors to be filed in the High Court of the Hong Kong Administrative Region (the Hong Kong Court) and a restructuring of the Company's capital with shareholder approval.
The Summons was supported by two affirmations made by Chan So Fun ( Mr Chan), a solicitor in Hong Kong in the firm of solicitors advising the Hong Kong liquidators (Michael Li & Co), two affidavits made by David Yen Ching Wai (one of the Hong Kong liquidators and a managing director of Ernst & Young Transactions Limited) one affirmation made by Stephen Liu Yiu Keung (the other Hong Kong liquidator and also a managing director of Ernst & Young Transactions Limited) and one affidavit made by David Andrew Freeman (a paralegal with Ogier, the firm of attorneys acting for the Liquidators). David Yen Ching Wai and Stephen Liu Yiu Keung are referred to as the Liquidators. As I have said, this was an ex parte summons and so no notice has yet been given to the Company's directors, shareholders or creditors.
The Summons was issued pursuant to a letter of request dated 19 July 2017 from the Hong Kong Court addressed to this Court, which was issued pursuant to an order of Mr Justice Harris (the Letter of Request). The Letter of Request sets out the orders which this Court is requested to make. I shall explain and discuss the precise terms of the proposed orders shortly.
For the reasons explained below, I have concluded that I can and should permit the Liquidators to apply in the name and on behalf of the Company for and promote a parallel scheme in Cayman and that I should take steps that will ensure that proceedings commenced against the Company pending the consideration and sanctioning of the scheme can be adjourned or stayed in order to allow the scheme process to be completed. However, I consider that the order to be made should be in a different form from and grant relief in a different manner from that detailed in and set out in the Letter of Request (although the order will be in accordance with and respond to the Letter of Request which invited this Court to give such further or other relief by way of cross-border judicial assistance at common law as thi Court considers just and convenient). I also consider that the Liquidators should only be permitted to apply for an order convening the scheme meeting(s) after the Company's directors, shareholders and creditors have been notified of the Summons and given an opportunity to file objections or submissions and be heard by this Court. If no such objections or submissions are filed, and if no-one notifies the Liquidators of their intention to appear and be heard, the Liquidators may proceed to file the Company's petition for an order convening the scheme meeting(s) without the need for a further hearing.
The Company has various significant connections with Hong Kong. In particular its shares have been listed on the Main Board of the Hong Kong Stock Exchange ( HKSE) since 14 January 2002. However since 18 September 2014 the Company's shares have been suspended from trading. Furthermore the corporate business of the Company has been administered from Hong Kong and the Company was registered under part XI of the former Companies Ordinance on 4 November 1999.
On 11 November 2014 a creditor of the Company presented a winding up petition on the ground that the Company was insolvent and unable to pay its debts. On 17 August 2015 the Hong Kong Court made a winding up order (the Winding up Order) and appointed the Liquidators.
Since their appointment the Liquidators have considered what action to take in order to maximise recoveries for and protect the interests of the Company's creditors. They have concluded that the best option available involves giving effect to a resumption proposal and reorganisation of the Company. The Company, with Fine Era Limited, (the Vendor), which is a BVI company, submitted a resumption proposal to the HKSE on 24 August 2016. The purpose of the resumption proposal is to permit the Company to satisfy the HKSE's conditions for allowing the Company's shares to be re-listed, to inject into the Company an active and profitable business and sufficient funds to permit the Company to make a payment to its creditors and for working capital and the payment of the fees involved in the process.
The resumption proposal involves an agreement between the Company and the Vendor with various terms and steps. Under the agreement the Company will purchase from the Vendor for a consideration of HK$400,000,000 the entire equity interest in Yu Ming Investment Management Limited ( Yu Ming). Yu Ming is a licenced corporation carrying on various regulated activities including dealing in securities, advising on securities and asset management. Following the acquisition by the Company of the equity interests in Yu Ming there will be a capital reorganisation of the share capital of the Company (comprising a capital reduction, share consolidation and increase in the Company's authorised share capital) so as to facilitate the issue of new shares in the Company under a placing and open offer. The placing will raise funds of approximately HK$462,222,000 which will be used for the partial settlement of the consideration payable by the Company for the acquisition of the equity interests in Yu Ming and also to fund a settlement to be offered to the Company's creditors under the proposed schemes of arrangement. Further funds of approximately HK$78,137,000 will also be raised under the proposed open offer. The Company will transfer HK$80,000,000 from the placing to the proposed schemes of arrangement for distribution to the Company's creditors in settlement of their debts. In addition the Vendor will provide a cash advance to the Company and additional funding to finance fees.
In order to give effect to the resumption proposal and to satisfy the HKSE's resumption conditions the Liquidators will apply on behalf of the Company to the Hong Kong Court for the approval and sanctioning of a scheme of arrangement and will also apply for the permanent stay of the Hong Kong winding up upon the successful implementation of the scheme. In addition to the Hong Kong scheme the Liquidators wish to promote a Cayman scheme. After consulting legal advisers in both Hong Kong and Cayman the Liquidators concluded that it was necessary for an inter-conditional scheme to be implemented in the Company's place of incorporation that is the Cayman Islands, in parallel with the proposed Hong Kong scheme.
The Liquidators also concluded that it would not be possible or appropriate in the present case for a winding up petition to be presented in Cayman in respect of the Company and for an application to be made in Cayman for the appointment of provisional liquidators who would then promote the Cayman scheme. Such an approach has, of course, been taken in a number of other cases in the past — in which a company subject to a foreign insolvency proceeding and proposing to implement a corporate reorganisation or rescue has, following the presentation of a winding up petition, applied for the appointment of a provisional liquidator under section 104 (3) of the Companies Law (2016 Revision) (the Companies Law)) so that the provisional liquidator, working in conjunction with the foreign representative, could apply under section 86(1) of the Companies Law on behalf of the Company for the convening of meetings of creditors to approve and the sanction by the Court of a Cayman scheme (with the benefit of the statutory stay and moratorium). The Liquidators took advice from Richard de Lacy QC (who sadly died recently and to whom I should like to pay tribute as a fine Cayman and English lawyer and a true gentleman). Based on this advice they concluded that there were various uncertainties that made it undesirable to seek to present a winding up petition in Cayman, particularly if an alternative option was available. Mr de Lacy had expressed a concern that before the Company's directors could present a winding up petition they would need to obtain a special resolution from the Company's shareholders, which would not only be time consuming and costly but would create difficulties for a listed company the trading of whose shares had been suspended (although I note that it does appear that the Company's articles of association give the directors the power to petition...
To continue reading
Request your trial