RE INTEL ASIA HOLDING LTD

HCMP 2142/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2142 OF 2013

____________

____________

__________________________

REASONS FOR JUDGMENT

__________________________

1.  This is a petition for confirmation of reduction of the share capital of Intel Asia Holding Limited (“the Company”) under section 59 of the Companies Ordinance, Cap 32 (“the Ordinance”).

2.  The Company was incorporated in Hong Kong on 6 August 2003 as a private company limited by shares.  Its principal activity is investment holding - it is the holding company of 15 Intel subsidiaries in Asia.

3.  The Company’s existing share capital is US$1,972,456,367 divided into 1,972,456,367 ordinary shares of US$1.00 each, all of which have been issued to and are being held by Intel Holdings B.V. (“Sole Shareholder”) and have been fully paid up.

4.  The Company’s proposal is to reduce its capital to US$120,000,000 by the cancellation of 1,852,456,367 ordinary shares. This will give rise to a credit in the Company’s accounts in the amount of US$1,852,456,367. This amount will be repaid in cash, cash equivalents or its investments to the Sole Shareholder. This sum of US$1,852,456,367 proposed to be repaid to the Sole Shareholder is in excess of the wants of the Company and in the opinion of its directors no longer be usefully employed in its business.

5.  The Company’s accumulation of capital is a result of a series of capital injections between 2008 and 2010 by entities within the Intel Group, including the Sole Shareholder, to fund the acquisitions of the Company’s subsidiaries. Since the acquisitions, the operations of these subsidiaries have been successful and generated good cash flow on their own accord. They are also in a position to pay, or have paid, dividends to the Company. As a result, the Company has accumulated cash and/or cash equivalents to its current level which has well exceeded its needs. 

6.  According to its Audited Accounts for the 52 weeks ended 29 December 2012, the Company’s total current assets were approximately US$4.023 billion, including cash and cash equivalents of about US$416 million, financial assets at fair value through profit and loss of about US$853 million and available-for-sale investments of about US$1.516 billion. Total liabilities stood at approximately US$1.82 billion.

7.  According to its Management Accounts for the 21 weeks ended 25 May 2013, the Company’s total current assets were approximately US$4.353 billion, including cash at banks of approximately US$261 million, financial assets at fair value through profit and loss of about US$1.333 billion and available-for-sale investments of about US$1.512 billion. Against this, the Company had total current liabilities of approximately US$1.866 billion, of which approximately US$1.796 billion were due to the Company’s subsidiaries, the Company’s ultimate parent, Intel Corporation, and Intel Corporation’s other subsidiaries (“Intel Group Creditors”).

8.  The remaining current liabilities owed to the Company’s other creditors who were not Intel Group Creditors amounted to approximately US$70 million in aggregate. This liability was related to the Company’s investment in a treasury investment product and was settled in full on 28 May 2013 when cash settlement occurred with the bank.

9.  Article 50 of its articles of association provides that the Company may, by special resolution, reduce inter alia its share capital in any manner and with, and subject to, any incident authorised and consent required by law.

10.  By a special resolution of the Company dated 26 August 2013 signed on behalf of the Sole Shareholder in accordance with Section 116B of the Ordinance:-

“it was resolved:

‘THAT conditional on the Capital Reduction… becoming effective on the registration of the confirming order and the minute, the issued share capital of the Company be reduced from 1,972,456,367 ordinary shares of US$1.00 each to 120,000,000 ordinary shares of US$1.00 each by cancelling paid-up capital to the extent of US$1.00 per share upon each of 1,852,456,367 of the issued ordinary shares registered in the name of the Sole Shareholder.’

it was further resolved:

‘THAT US$1,852,456,367.00 of the credit of US$1,852,456,367.00 arising in the books of accounts of the Company as a result of the cancellation of paid-up capital pursuant to the Capital Reduction, being in excess of the needs of the Company and which cannot any longer be usefully employed in the Company’s business, be repaid to the Sole Shareholder.’ ”

11.  None of the creditors of the Company will be prejudiced by the proposed reduction of capital. As disclosed in the Management Accounts, the Company’s current assets are approximately US$4.35 billion so that after the reduction of capital and distribution to the Sole Shareholders, its current assets will be in the region of US$2.5 billion. As the total amount due to Intel Group Creditors are about US$1.8 billion only, the Company’s net current assets will still amount to approximately US$700 million after the reduction and distribution. 

12.  In addition, the Company has obtained written consent from the Intel Group Creditors to the proposed reduction of capital and subordination of their debts to the Company’s other creditors.

13.  On 10 September 2013, an order was made by this court that section 59(2) of the Ordinance shall not apply as regards any class of creditors of the Company.  Directions given by this court for the advertisement of notice of the presentation of the Petition and the date of hearing of the Petition have been complied with.

14.  The reduction of capital is permitted under the Company’s articles. It has been explained to and approved by the Sole Shareholder. It  is for a discernible purpose and it does not appear that the interest of creditors will be adversely affected. It is a reduction which ought to be confirmed and this court has therefore made an order confirming the proposed reduction of capital as per the draft submitted by Counsel.