Section 15 of the Companies Act (2023 Revision) and Order 102 of the Grand Court Rules (as Amended) and Green Economy Development Ltd

• Jurisdiction: Cayman Islands
• Judge: Justice Kawaley
• Judgment Date: 29 November 2023
• Docket Number: CAUSE NO. FSD 294 OF 2023 (IKJ)
• Court: Grand Court (Cayman Islands)

In the Matter of Section 15 of the Companies Act (2023 Revision)

And in the Matter of Order 102 of the Grand Court Rules (As Amended)

And in the Matter of Green Economy Development Limited

Before:

The Hon. Justice Kawaley

CAUSE NO. FSD 294 OF 2023 (IKJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

INDEX

Capital reduction sanction petition-no diminution in shareholders' liability or return of capital-governing principles-Companies Act (2023 Revision), sections 14–16

Appearances:

Mr Tom Wright of Collas Crill for the Petitioner

IN CHAMBERS

EX TEMPORE JUDGMENT

Introduction

1 This is a Petition dated on the 27 September 2023, seeking the court's confirmation of a reduction of the Petitioner's issued share capital, pursuant to Sections 15 and 16 of the Companies Act (2023 Revision).

2 The Application today is unopposed, but it seems to me that it is appropriate for brief reasons to be given because of one evidential wrinkle which takes this case somewhat out of the norm.

3 The Petition is very clearly drafted and explains the purpose of the capital reduction sanction which is sought as follows:

“ Purpose of Capital Reduction

7. The Capital Reduction is one of a series of steps the Petitioner has taken or intends to take as part of a capital reorganisation ( Capital Reorganisation).

8. The purpose of the Capital Reduction is to utilise the credit arising thereof to offset the accumulated losses of the Petitioner as at the effective date of the Capital Reduction.

9. The other steps in the process are a share consolidation, a share premium reduction and a change in board lot size.”

4 The process which has been followed is described in the Petition. Firstly, mention is made of Article 14 of the Articles, to which I was referred in the course of argument. This empowers the Company by special resolution to reduce its share capital in any manner authorized, subject to any conditions prescribed by law.

5 A Special Resolution under Article 1(c), to which I was also referred, requires a vote of not less than ³/₄ of the votes passed by the Shareholders entitled to vote in person or in proxy. The Petition then goes on to describe how announcements were made on the Hong Kong Stock Exchange (“HKSE”) in February 2023, explaining the intention to effect a reduction in share capital as part of a wider Capital Reorganisation.

6 The Extraordinary General Meeting (the “EGM”) was held after a supplemental circular had been issued on the Hong Kong Stock Exchange in connection with a non-executive Director, and at the EGM on 6 April 2023, the relevant special resolution was passed. It is described in the Petition as follows:

“ i. the issued share capital of the Petitioner be reduced by (i) eliminating any fraction of a Consolidated Share in the issued share capital of the Petitioner arising from the Share Consolidation in order to round down the total number of Consolidated Shares to a whole number; and (ii) cancelling the paid up capital to the extent of HK$0.03 on each of the then issued Consolidated Shares such that the par value of each issued Consolidated Share will be reduced from HK$0.04 to HK$0.01; and

ii. immediately following the Capital Reduction, each of the authorised but unissued Consolidated Shares of par value of HK$0.04 each be sub-divided into four (4) new shares of par value of HK$0.01 each ( New Shares) ( Share Sub-Division), of which 449,999,949 New Shares will have been issued and will be fully paid or credited as fully paid and this remains the amount of the share capital of the Petitioner as at the date of this Petition; and

iii. the credits arising in the books of the Petitioner from the Capital Reduction be applied towards offsetting the accumulated losses of the Petitioner ( Accumulated Losses) as at the effective date of the Capital Reorganisation; and

iv. the balance of the credit (if any) after offsetting the Accumulated Losses may be applied by the Petitioner in any manner as permitted by all applicable laws and the Articles.”

7 The Petition next recites the actual wording of the Special Resolution passed and then proceeds to deal with issues of creditor protection and shareholder treatment, averring as follows:

“ Creditor Protection and Shareholder Treatment

22. The Capital Reduction will result in a reduction in the balance of the share capital line item in the Petitioner's balance sheet and reduce the Petitioner's accumulated losses, to the benefit of the Petitioner and its shareholders collectively.

23. The Capital Reduction will not have any cash flow impact or involve any return on investment to any one or more shareholders, nor will it involve a change in the Petitioner's total equity or the rights of shareholders.

24. The Capital Reduction involves neither diminution of liability in respect of paid up share capital nor payment to any shareholder of any paid-up capital.

25. The Petitioner will continue to be able to pay its debts as they fall due in the ordinary course of business following completion of the Capital Reduction. Consequently, the interests of any creditors will be unaffected by the Capital Reduction.”

8 On 12 October 2023, I granted directions on the Petitioner's application and those directions involved my determination that the requirement for a list of creditors under Section 15 (2) of the Companies Act should be dispensed with and also involved the following important provisions:

“3. Notice of the hearing of the Petition shall be published in the Cayman Islands Compass, the South China Morning Post and the Singapore Straits at least 21 days before the date of the hearing of the Petition; and

4. Any creditor or shareholder of the Petitioner who wishes to oppose the making of the Order for the confirmation of the reduction of capital shall provide notice to the Attorneys for the Petitioner that they intend to appear at the hearing in person or by counsel for that purpose a minimum of three clear days prior to the hearing”

9 Mr Wright confirmed firstly, through the Second Affidavit of Mr Chau Chit, that the relevant advertisements had been placed and secondly that no creditors had actually signified their intention to appear. It was, of course, self-evident that no one appeared at the hearing of the Petition.

10 In the course of argument it was discovered that, in fact, the relevant Singapore newspaper is indeed ‘The Straits...