RE KIBUN HONG KONG CO LTD

HCMP 2270/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2270 OF 2003

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J U D G M E N T

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1. This is a petition of Kibun Hong Kong Company Limited ("the Company") to confirm a reduction of capital.

2. The Company was incorporated on 16 March 1982, its name was changed to its present name on 14 May 1982. The original capital was HK$1,000.00 divided into 1,000 ordinary shares of HK$1 each. Resolutions were passed to increase the capital on a number of occasions and to consolidate the additional shares created so that the present authorised capital is HK$25,080,000.00 divided into 8,000 ordinary shares of HK$3,135.00 each, all of which are issued and fully paid up.

3. The Company is a wholly owned subsidiary of Kibun Headquarters Asia Pte. Ltd. ("Kibun HQ"), a company incorporated in Singapore. There are only two shareholders in the Company, Kibun HQ holding 7,999 shares and Hiroshi Arai, a director of the Company, holding the remaining shares.

4. The Company has been carrying on business as a food wholesaler.

5. There is provision in the articles of association for reduction of capital by special resolution, subject to any confirmation required by law.

6. At an Extraordinary General Meeting of the Company on 15 April 2003, the Company passed a special resolution to reduce the capital from HK$25,080,000.00 divided into 8,000 ordinary shares of HK$3,135.00 each to HK$80,000.00 divided into 8,000 ordinary shares of HK$10.00 each, and that such reduction be effected by cancelling paid up capital to the extent of HK$3,125.00 on each of the 8,000 ordinary shares of HK$3,135.00 each, and reducing the nominal value of each of the 8,000 ordinary shares to HK$10.00.

7. The reason for the reduction of capital is that the paid up capital of the Company to the extent of HK$25 million and upwards had been lost or was unrepresented by available assets.

8. The audited financial statements of the Company from 1989 were disclosed. As appeared from the latest audited accounts of the Company for the year ended 31 December 2002, the Company had accumulated losses of HK$26,501,577.00, which were attributable to losses carried forward from the preceding years.

9. From 1989 to 1999, accumulated losses in excess of HK$28 million were suffered by the Company owing to losses on the disposal of unsold food, interest payment, bad debts and the disposal of assets. Some of the bad debts were owed by Yaohan Department Store (HK) Ltd which was wound up by the court in 1997. Other bad debts were owed to another company in the same group as the Company in Brazil known as Meimon-Kibun Ind. E. Com. Ltd. ("Meimon-Kibun"). This company was put into liquidation and that was more than twelve years ago. However, no dividends have been declared and paid to the Company as creditor. Recent effort and steps have been taken to ascertain the position of the winding-up of Meimon-Kibun and they are to no avail.

10. I am satisfied the losses suffered by the Company are permanent losses.

11. An order was made on 15 July 2003 for the settlement of a list of creditors to be dispensed with. Directions were given on that occasion for the advertisement of the petition.

12. No creditor has appeared in opposition at the hearing today.

13. There is no question of inequitable treatment of shareholders in the proposed reduction.

14. Further, the reduction is for a discernible purpose.

15. I am satisfied there would be no prejudice to the creditors. The proposed reduction does not involve the diminution of any liability in respect of unpaid capital or the payment to any shareholders of any paid up capital.

16. Although the Company has a net deficit of approximately HK$1.4 million in the audited financial statements as at 31 December 2002, this has been reduced to approximately HK$373,000.00 in the management account as at 31 August 2003. As appeared from the accounts, the Company has been restored to profitability since 1999, and it has no long term liability. The largest creditor of the Company, which is a bank, has not raised any objection to this petition and the Company has sufficient cash on hand to meet the account payables. It seems that the Company should be able to meet the net deficit, which is a relatively insubstantial amount, within a short period.

17. It would be appropriate to confirm the proposed reduction of capital in these circumstances. I make an order in terms of the draft submitted to me as amended.