The Sections 14 to 16 and Section 86 of the Companies Act (2021 Revision) and Nature Home Holding Company Ltd

• Jurisdiction: Cayman Islands
• Judge: Justice David Doyle
• Judgment Date: 19 October 2021
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO: FSD 235 OF 2021 (DDJ)

In the Matter of the Sections 14 to 16 and Section 86 of the Companies Act (2021 Revision)

And in the Matter of Nature Home Holding Company Limited

Before:

The Hon. Justice David Doyle

CAUSE NO: FSD 235 OF 2021 (DDJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Application to sanction a scheme of arrangement with shareholders — basis for sanctioning the scheme — basis for confirming the reduction of share capital — importance of strong and independent local legal profession

Appearances:

Ms Fiona MacAdam and Mr Will Waldron of Walkers on behalf of the Company

IN OPEN COURT

Introduction

1 I shall now deliver a judgment in the proceedings under reference FSD 235 of 2021 (DDJ).

The relief sought

2 Nature Home Holding Company Limited (the “Company”) is an exempted company incorporated with limited liability under the laws of the Cayman Islands. The Company seeks, pursuant to section 86 of the Companies Act (2021 Revision) (the “ Companies Act”), an order from this Court sanctioning a scheme of arrangement between the Company and the holders of the Scheme Shares (as defined in the Scheme attached to the draft Order helpfully filed in advance of the hearing)(the “Scheme”). Further the Company seeks, pursuant to section 16 of the Companies Act, the confirmation of this Court of the resolution of the Company's shareholders to reduce the Company's share capital to give effect to the Scheme (the “Capital Reduction”).

Appearances

3 Fiona MacAdam and Will Waldron of Walkers appear on behalf of the Company. I am grateful to them for their valuable assistance to the Court in respect of this matter. It is most appreciated.

4 Over the last 4 months or so, since I stepped foot on Grand Cayman, I have been greatly assisted by first class attorneys. The local legal profession is a real jurisdictional advantage of the Cayman Islands. The resource of specialist attorneys with regular practical experience and great advocacy skills puts the Cayman Islands out at the front of the international finance centres worldwide. The importance of a strong and independent local legal profession should not be underestimated. It is a real privilege and pleasure to be sitting as a Financial Services Division Judge in this jurisdiction. I reiterate my appreciation of the assistance provided to the Court by the local Bar and those overseas advocates fortunate enough to benefit from limited admission and to appear remotely until circumstances facilitate their attendance in person.

Documentation and submissions considered

5 I have considered all the documents in the bundles presented to the Court including the Petition, the evidence in support, the draft Order and the written submissions. I have also considered the oral submissions so eloquently presented by Ms. MacAdam.

The resolutions

6 The Scheme was duly approved by an overwhelming majority of the Qualifying Shareholders at the Court Meeting (by 92.1% in number and 98.77% in value) convened and held on 6 October 2021 (Hong Kong time), substantially in accordance with the terms of the Order I made on 7 September 2021 (the “Convening Order”).

7 The resolutions pertaining to the Capital Reduction were also passed by an overwhelming majority of the shareholders at the extraordinary general meeting held immediately after the conclusion of the Court Meeting on 6 October 2021.

The Scheme

8 I agree that the practical purpose of the Scheme is simple: to effect a privatization of the Company.

9 In short summary, the object of the Scheme and the connected Capital Reduction is for the Offeror namely New Modern Home Limited, a company incorporated in Hong Kong with limited liability and the Offeror Concert Parties (as defined in the Petition) to hold, in aggregate, the entire issued capital of the Company and thereby become the owners of the Company and its subsidiaries (the “Group”).

10 The way in which this is intended to be achieved is set out with refreshing simplicity and clarity at paragraph 8 of the 17 page written submissions dated 8 October 2021, namely:

• (1) the Company reducing its share capital by the cancellation and extinguishment of all of the Scheme Shares;

• (2) the Company, forthwith upon the Capital Reduction taking effect, increasing its share capital to its former amount by the issue of the same number of new shares to the Offeror as the number of Scheme Shares cancelled and extinguished;

• (3) the Company applying the credit arising in its books of account as a result of the Capital Reduction in treating as fully paid up those new shares, newly issued to the Offeror. This immediate recapitialisation will achieve the objective of maintaining the Company's former share capital;

• (4) in consideration for the cancellation and extinguishment of the Scheme Shares, each holder of the Scheme Shares as at Scheme Record Date (each a “Scheme Shareholder”) will receive Hong Kong $1.70 for each Scheme Share so cancelled from the Offeror; and

• (5) the listing of the Shares of the Company on the Hong Kong Stock Exchange being withdrawn.

11 The Scheme is as simple as that, but this is all subject to this Court sanctioning the Scheme and confirming the Capital Reduction as required by law.

12 I should record that regulatory approval from the Hong Kong Stock Exchange to the listing withdrawal application has already been obtained subject to this Court sanctioning the Scheme and confirming the Capital Reduction.

13 The principal activities of the Company and the Group are the manufacturing and sale of flooring products and customised home decoration products including wooden doors, wardrobes and cabinets. The Group is one of the largest wood flooring brands in China in terms of market share by sales value of branded wood flooring products. The Company's head office is...