In re GUANGDONG TANNERY LTD.

1998, MP No.563

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

--------------------

--------------------

----------------------

D E C I S I O N

----------------------

1. This is an application by petition for the confirmation of the reduction of the share premium account of Guangdong Tannery Limited ("the Company"). The authorised share capital of the Company is 700 million shares of ten cents each. The issued and paid-up capital is 527,908,000 ordinary shares. There are certain outstanding options to the employees and officers of the Company, but between the date of the petition and today's hearing, none of the options had been taken up.

2. There is standing to the credit of the share premium account of the Company as at 6 February 1998 approximately $446.5 million. By a special resolution passed on 23 January 1998 pursuant to section 116 of the Companies Ordinance, it was resolved that the share premium account of the Company be reduced by $34,396,597. The reason for the reduction of the share premium account is because goodwill arising on consolidation. On 30 June 1997, the Company acquired 60% in the Gastor Group of Companies and the goodwill arising out of that transaction amounts to $12,498,391. There was a further transaction whereby the Company, via its interest in the Gastor Group acquired an interest in the Alpha Group on 1 September 1997, and the goodwill arising on consolidation in that transaction is $21,918,206. The total goodwill therefore comes to the sum of $34 million odd.

3. The principles for the court in approving a reduction in the share premium account to eliminate goodwill arising on consolidation are set out in my earlier decision in Re Lippo China Resources Limited 1997, MP4195.

4. In the present case, all the four conditions have been satisfied and it is an appropriate case, on the evidence, that the court should confirm the reduction of the share premium account and I make an order in terms.