RE CHINA OIL GANGRAN ENERGY GROUP HOLDINGS LTD

HCMP 503/2021 and HCCW 120/2019
(HEARD TOGETHER)
[2021] HKCFI 1592

HCMP 503/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 503 OF 2021

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 120 OF 2019

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____________________

(HEARD TOGETHER)

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R E A S O N S   F O R   D E C I S I O N

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The Application

1.  The Company seeks (a) the Court’s sanction under section 673 of the Companies Ordinance (Cap 622) (“Ordinance”) of a scheme of arrangement between the Company and its Scheme Creditors, and (b) the Court’s approval of an amendment to the Scheme to correct a drafting error.

2.  The Scheme Meeting was duly convened on 18 May 2021. The resolution of the Scheme Meeting was carried by a majority in number of the Scheme Creditors present and voting, in person or by proxy, holding 91.58% of the Claims voted.

3.  The Scheme forms part of a wider restructuring which involves new investors acquiring a controlling stake in the Company with a view to saving the Company’s Hong Kong listing status.  A successful restructuring will give the Scheme Creditors a higher recovery (estimated to be 12.9%) than a liquidation.  Absent restructuring, the Company would be liquidated and the Scheme Creditors’ estimated recovery would be 0.5%–0.9%.

Corporate background

4.  The Company was incorporated in the Cayman Islands, is registered as a non-Hong Kong company, and has been listed on the Growth Enterprise Market of the Hong Kong Stock Exchange (“SEHK”) since 18 May 2011.  Trading in the Company’s shares has been suspended since 2 July 2019.

5.  The Company is an investment holding company with subsidiaries in Hong Kong, the British Virgin Islands, and the Mainland (together, “Group”).  The Group’s business focuses on the following three areas:

(1)  power and data cords;

(2)  trading of refined oil and chemicals; and

(3)  trading of commodities.

6.  The Group’s operations are predominantly in Hong Kong and the Mainland.

The Company’s insolvency proceedings and restructuring efforts

7.  On 24 April 2019, a petition was presented to wind up the Company in Hong Kong (HCCW 120/2019) (“Petition”).  The Petition has been adjourned to 19 July 2021 to afford the Company time to pursue its restructuring.  On 5 November 2019, the Cayman Court appointed      soft-touch provisional liquidators (“PLs”) to facilitate the Company’s restructuring efforts.  On 5 May 2020, this Court granted recognition to the PLs.

8.  As one of the Company’s key assets is its Hong Kong listing status, the Company and PLs have sought to rescue the Company’s listing status so that the Company could resume trading its shares.  The Scheme is necessary in order to meet SEHK’s resumption conditions by the deadline of 31 May 2021.  Upon the completion of the Scheme:

(1)  the Subscribers will control about 75% of the Company’s shares;

(2)  the Company’s debts owed to the Scheme Creditors amounting to approximately HK$136 million will be discharged.

Principal features of the Scheme

9.  The Scheme seeks to discharge the Company’s general unsecured debts and in return the Scheme Creditors will be entitled to a pro rata distribution of the Scheme Consideration which includes the Cash Amount (approximately HK$17.6 million) and the Creditors’ shares.  In case there are creditors holding secured debts and preferential debts, these creditors will participate in the Scheme only to the extent of the unsecured, non-preferential portion of their claims.

Drafting error in the Scheme

10.  Clause 69 of the Scheme contains a drafting error which was discovered shortly before the Scheme Meeting. Clause 69 provides:

“In the event the Schemes are terminated pursuant to Clauses 67 or 68 above, the Claims which are discharged and extinguished against the Company under Clause 1 of this Scheme will be deemed to have revived and the Scheme Creditors will be entitled to pursue such Claims against the Company in such ways as if the Schemes had never been effective and binding upon them.”

11.  The reference to Clause 67 was a drafting error.  Clause 67 provides that the Scheme will terminate when the terms of the Scheme have been carried out.  It would not make sense for the Claims to revive after the Scheme Creditors receive all their entitlement under the Scheme.

12.  The Court may permit post-meeting modifications of a scheme if the modifications would not be likely to cause a hypothetical reasonable creditor to take a different view in relation to the scheme, and would not be foisting on scheme creditors something substantially different to that which has been approved at the scheme meeting [1].

13.  The reference in Clause 69 of the Scheme to Clause 67 was clearly erroneous and makes no sense because it would defeat the whole purpose of the Scheme.  Deleting the reference to Clause 67 would therefore not cause a hypothetical reasonable Scheme Creditor to take a different view in relation to the Scheme.  In my view, the Court can properly permit this post-Scheme Meeting deletion of the reference in Clause 69 of the Scheme to Clause 67.  I shall so order.

The legal principles governing the sanction of a scheme

14.  In considering whether to sanction a scheme, the Court applies some well-established principles which I recently restated in Re China Singyes Solar Technologies Holdings Ltd [2].  The Court will consider in particular the following:

(1)  whether the scheme is for a permissible purpose;

(2)  whether creditors who were called on to vote as a single class had sufficiently similar legal rights such that they could consult together with a view to their common interest at a single meeting;

(3)  whether the meeting was duly convened in accordance with the Court’s directions;

(4)  whether creditors have been given sufficient information about the scheme to enable them to make an informed decision whether or not to support it;

(5)  whether the necessary statutory majorities have been obtained;

(6)  whether the Court is satisfied in the exercise of its discretion that an intelligent and honest man acting in accordance with his interests as a member of the class within which he voted might reasonably approve the scheme; and

(7)  in an international case, whether there is sufficient connection between the scheme and Hong Kong, and whether the scheme is effective in other relevant jurisdictions.

Class composition

15.  In considering whether creditors are properly classified, the test is whether creditors who are called on to vote as a single class have sufficiently similar legal rights that they could consult together with a view to their common interest at a single meeting. The relevant principles may be summarised thus:

“The overarching question is whether the pre and post-scheme rights of those proposed to be included in a single class are so dissimilar as to make it impossible for them to consult with a view to their common interest. If that is the case, separate meetings must be summoned…

The second principle is that it is the rights of creditors, not their separate commercial or other interests, which determine whether they form a single class or separate classes. Conflicting interests will normally only ever arise at the sanction stage as a question for consideration …

The third principle … is that the court should take a broad approach to the composition of classes, so as to avoid giving unjustified veto rights to a minority group of creditors, such that the test for classes becomes an instrument of oppression by a minority …

The fourth principle is that the court has to consider, on the one hand, the rights of the creditors in the absence of the scheme and, on the other hand, any new rights to which the creditors become entitled under the scheme. If, having carried out that exercised [sic], there is a material difference between the rights of the different groups of creditors, they may, but not necessarily will, constitute different classes. Whether they do so depends on a judgment as to whether such a difference makes it impossible for the different groups to consult together with a view to their common interest.”[3]

16.  In applying the above test, the starting point is to identify the appropriate comparator: that is, what would be the alternative if the scheme does not proceed [4].

17.  I am satisfied that the Scheme Creditors properly voted as a single class for these reasons:

(1)  The appropriate comparator here is an insolvent liquidation because, absent the Scheme, an insolvent liquidation of the Company would be an unavoidable outcome.

(2)  The Scheme Claims are the Company’s general unsecured debts.

(3)  All general unsecured creditors will be given a pro-rated amount out of the Scheme Consideration (see Clause 19 of the Scheme).

(4)  There are no separate class disputes or conflicts of interest.

Statutory majorities

18.  The Scheme Meeting was uneventful and Scheme Creditors proceeded to vote overwhelmingly in favour of the Scheme.  The requirements under section 674(1)(b) of the Ordinance that the Scheme be approved by a majority in number representing at least 75% in value of the Scheme Creditors present and voting in person or by proxy are therefore satisfied.

Information provided to Scheme Creditors

19.  The Explanatory Statement is detailed and informative.  It satisfies the requirements of section 671(3) of the Ordinance.

Discretionary element: the “intelligent and honest man” test

20.  The primary object of the Scheme is that, upon the Scheme becoming effective, the Scheme Creditors’ claims will be discharged and in return they will be entitled to be given the Scheme Consideration in accordance with the terms of the Scheme.  The Scheme Consideration gives the Scheme Creditors a better return than would a liquidation of the Company.  The Scheme is one that an intelligent and honest person acting in accordance with his interests as a member of the class within which he voted might reasonably approve.

International effectiveness

21.  In a transnational restructuring, the Court considers whether there is sufficient connection between the scheme and Hong Kong [5] to justify the Court sanctioning it, and whether the scheme is effective in other relevant jurisdictions.  It would not be a proper exercise of the discretion to sanction a scheme that serves no purpose.  The Scheme clearly has strong and sufficient connection with Hong Kong, in particular, because the Company is listed in Hong Kong and a principal purpose of the Scheme is to protect that listing, it is a registered non-Hong Kong company, and managed from Hong Kong.  Further, essentially all of the Scheme Claims are governed by Hong Kong law.  However, as with most Hong Kong listed companies more than one jurisdiction is involved in the affairs of the Company.

22.  The Company is listed and has its centre of main interest in Hong Kong; its business operations are located in the Mainland; and it is incorporated in the Cayman Islands.  In these circumstances thought needs to be given as to whether or not in order to achieve the purpose of the Scheme it will be effective to compromise all or enough of the Company’s debt in a jurisdiction in which action could be taken, which might undermine the efficacy of the Scheme.  For example, would the Cayman court treat the Scheme as compromising all unsecured debt thus inhibiting the presentation of a winding up petition in the Cayman Islands.  Mr Justice Zacoroli has recently framed the efficacy issue as follows in [6] of his judgment in Re Gategroup Guarantee Limited:[6]

“In addition, the court needs to be satisfied that the Plan will achieve its purpose. Where there is a significant international element, that includes being satisfied that the Plan will be effective in those foreign jurisdictions where its recognition is of practical importance: see re Magyar Telecom BV [2014] BCC 488, at [16]; Re Sompo Japan Insurance Inc v Transfercom Ltd [2007] EWHC 146 (Ch), at [17]–[26]. Of particular relevance, in light of the co-obligor structure adopted by the Company in this case, is the effectiveness of the Plan under Swiss law (which governs the Bonds) to vary the terms of the Bonds as between the Bondholders and the Issuer.”

23.  In practice whether or not a jurisdiction is of practical importance to the efficacy of a scheme sanctioned in Hong Kong will commonly be determined by the following considerations:

(1)  Is a material amount of debt to be compromised by the scheme governed by the law of a jurisdiction other than Hong Kong?  Different jurisdictions having differing approaches to recognition of the effect of a scheme.  Some like Hong Kong, apply what is commonly known as the Rule in Gibbs[7], which provides that a debt is treated as discharged if compromised in accordance with the law of the jurisdiction, which governed the agreement giving rise to the debt.  Other jurisdictions focus on the features of the process said to have lead to the discharge of the debt.  For example under Chapter 15 of the United States Bankruptcy Code it is possible for a debtor to seek recognition of a scheme on the basis that the proceeding in Hong Kong is a foreign non-main proceeding and ancillary relief, which give effect to the terms of a scheme[8].  I note in passing that as a consequence of Hong Kong and the Mainland entering into an arrangement on 14 May 2021 for recognition by certain Intermediate People’s Courts of a Hong Kong scheme of arrangement it is now possible for a Hong Kong scheme to compromise debt governed by Mainland law.

(2)  Even if there is some doubt as to whether or not a scheme will compromise a proportion of the debt, is there any reason to think that the creditors will take action in a jurisdiction which will not recognise a scheme as compromising the debt?  Clearly if a creditor, whose debt is governed by Hong Kong law, agrees to the terms of a scheme there is no need to be concerned about enforcement in another jurisdiction and, if the Rule in Gibbs is applied in that other jurisdiction, participation in the scheme process provides an exception to the Rule [9].

(3)  The amount of the debt involved.  If, for example, the amount of debt that is not governed by Hong Kong law is less than the cost of introducing a parallel scheme it makes more sense to exclude that debt from the scheme and settle it separately if it is ever pursued.

24.  An illustration of how these considerations operate in practice is illustrated by my decision in Re China Singyes Solar Technologies Holdings Ltd [10]. I explain the following in [18].

“18(2) Although the Convertible Bonds are governed by English law, there is no need to seek recognition of the Scheme in England. This is because 100% of the holders of the Convertible Bonds voted in favour of the Scheme. Accordingly, there is no issue about the ‘Gibbs rule’ because ‘there is an exception to the rule if the relevant creditor submits to the foreign insolvency preceding. In that situation, the creditor is taken to have accepted that his contractual rights will be governed by the law of the foreign insolvency proceeding’ (Re OJSC International Bank of Azerbaijan [11]). Therefore, the Scheme will be effective in England.

18(3) The 2018 Notes and the 2019 Notes are governed by New York law. I accept that there is no need to seek recognition of the Scheme under Chapter 15 of the US Bankruptcy Code for these reasons:

(i) More than 99% of the holders of the 2018 Notes and the 2019 Notes voted in favour of the Scheme.

(ii) There are examples of Chapter 15 recognition despite a very high percentage of voting in favour of a scheme (eg Re NN2 Newco Ltd [12]). However, there is no invariable rule that a Chapter 15 recognition is necessary whenever New York law-governed debts are compromised.

(iii) Where the circumstances so warrant, the Court may take a robust approach to the notion of international effectiveness: Re Perusahaan Perseroan (Persero) PT Perusahaan Penerbangan Garuda Indonesia [13]. In Garuda, an English scheme in respect of an Indonesian company was sanctioned despite the existence of dissenting creditors and despite the fact that there was no parallel scheme in Indonesia or formal recognition of the English scheme in Indonesia.

(iv) Ultimately, the guiding principle is that the Court should not act in vain or make an order which has no substantive effect or will not achieve its purpose. The principle does not require either worldwide effectiveness or worldwide certainty. Thus it does not require that the Court must be satisfied that the scheme will be effective in every jurisdiction worldwide: its focus is on jurisdictions in which, by reason of the presence there of substantial assets because of which creditors might make claims, it is especially important that the scheme be effective. The Court will sanction the scheme provided it is satisfied that the scheme would achieve a substantial effect: Re Lehman Brothers International (Europe) (No 10) [14].

(v) In the present case, the Scheme will achieve a substantial effect even without Chapter 15 recognition.  The Company does not know the identity of the remaining Scheme creditors who did not vote and has no reason to believe that any of them would try to enforce their pre-Scheme claims in the United States. Especially in view of the overwhelming Scheme creditors’ support of the Scheme, I accept that the risk of adverse enforcement by a dissenting Scheme creditor in the United States is de minimis.”

25.  As I have already mentioned in the present case a parallel scheme was also introduced in the Cayman Islands.  This is a subject which I address in the next section.  To conclude this issue, the Scheme will be effective.

The need for a parallel scheme

26.  The facts of this case justify further comment on the decision that was made to introduce a parallel scheme in the place of incorporation.

27.  The gross proceeds of the subscription are HK$36.9 million (US$4.73 million) of which HK$17.6 million (US$2.25 million) will be available for distribution to Scheme Creditors. As these figures illustrate because of the deteriorating value of the listed status of companies in Hong Kong, the realisation of which drives the type of scheme introduced in the present case, the amount of cash available to Scheme Creditors is small.  This fall in value is a consequence of the large number of listed companies that have become insolvent in recent years.  It follows that it is imperative that the cost of the restructuring of these kinds of companies is carefully controlled.  In the present case a parallel scheme was introduced in the Cayman Islands and sanctioned on 14 May 2021. It is difficult to see what justification there was for this given the minimal amount of debt not governed by Hong Kong law and apparently no indication that any of the creditors whose debt might not be compromised in accordance with the Rule in Gibbs were likely to seek a winding up of the Company in the Cayman Islands.

28.  In the case of a company listed in Hong Kong, whose debt is very largely governed by Hong Kong law, the principle relevant jurisdiction is Hong Kong.  It is Hong Kong in which a scheme is necessary and any restructuring should proceed on this basis.  It is only necessary to introduce a scheme in the place of incorporation if there is good reason to think that absent a scheme sanctioned in the place of incorporation there is a genuine risk of the company being wound up there.  It would not, for example, make any sense to incur more costs in introducing a scheme in the place of incorporation than the amount of the debt that it is thought might not be compromised by a scheme sanctioned in Hong Kong.

29.  If costs are reduced there will be more available for unsecured creditors.  The directors of the Company and the PLs should have been advised that they owe fiduciary duties to protect the interests of the unsecured creditors and that they should aim to ensure that the maximum amount of the gross proceeds of the subscription were available for distribution to Scheme Creditors [15]. Unless a genuine need to introduce a scheme in the Cayman Islands could be identified it was only necessary to introduce a scheme in Hong Kong.

30.  I asked Mr Ho if he was able to explain why it was thought necessary to introduce a scheme in the Cayman Islands.  I understand he was not involved in that decision.  The PLs instructed Mr Ho to hand up to me a copy of the advice that they had received from Mr Chai Ridgers at Harneys on which they waived privilege.  On 16 March 2021 Mr Frederic Leung of the PLs sent an email to Mr Ridgers in which he asked two questions:  “……could you advise on the risk of a creditor with Hong Kong governing debt (which compromised by a Hong Kong scheme) who filing a winding up petition against the Company in the Cayman Islands (i.e. the place of incorporation). In addition, please also advise the use/rationale of parallel Scheme in both Hong Kong and Cayman if in the case that the Company have 40–70% creditors’ support.”  I note that there is nothing to suggest either in Mr Leung’s email or Mr Ridgers’s subsequent reply that the Company had any debt other than Hong Kong law governed debt.

31.  The final sentence of Mr Leung’s email is, as I would have expected Mr Ridgers to have appreciated, a non sequitur. The material question that was being asked is clearly whether or not a Hong Kong scheme will as a matter of Cayman Islands law compromise the debt thus defeating a winding up petition presented in the Cayman Islands.  Mr Ridgers states in his email in reply to Mr Leung, that the Rule in Gibbs “remains good law in the Cayman Islands.”  It follows that as a matter of Caymans Islands law only a scheme introduced in Hong Kong would be recognised as compromising the Hong Kong law debt.  Consequently a scheme introduced in the Cayman Islands would have no utility.  However, Harneys advised the opposite.

32.  Mr Ridgers says this:

“Pursuing parallel schemes of arrangement in both Hong Kong and the Cayman Islands, sometimes together with recognition proceedings in other jurisdictions (if appropriate) remains favourable to achieving a properly risk mitigated cross-border restructuring. This is because undertaking parallel restructurings in the place of incorporation and in the country of the law of the debt gives maximum effectiveness and recognition to the restructuring. To do otherwise risks having no robust protection in the place of incorporation. By way of explanation:

…

• The proper approach should be for the implementation of a scheme in the home jurisdiction, together with a parallel proceeding in (in this case) Hong Kong where there is foreign debt that requires a parallel proceeding to effectively compromise it, by reason of the recently reaffirmed Gibbs rule, which remains good law in the Cayman Islands.

• Once a Hong Kong scheme comes into effect, the restructuring provisional liquidation would need to be brought to an end (as that is a necessary requirement), at which point the moratorium will fall away—opening the door for dissenting creditors or creditors who do not take any part in the restructuring, to come to the Cayman Islands for relief.

…

• The final issue relates to whether it is a creditors’ or members’ scheme.  Issues relating to share capital are, by virtue of private international law, governed by the laws of the place of incorporation.  In this instance we understand, whilst it is a creditors scheme that is contemplated, there is an intention to issue shares, which will be governed by Cayman Law, as well as Hong Kong regulations.  It seems to us therefore that there should properly be a Cayman scheme.  Not to do so would be a significant departure from decided case law.”

33.  Mr Ridgers then goes onto to refer to some general statements in a number of decisions.  These do not address the issue to hand, which is whether it is necessary to introduce a scheme in the Cayman Islands to compromise debt governed by Hong Kong law. Mr Ridgers continues in penultimate paragraph of the email:

“Turning now to your first point, creditors of Hong Kong law governed debt, who have participated in and are compromised by the Hong Kong scheme, would have difficulty in thereafter pursuing the same debt by way of a winding up petition, simply because the debt has already been compromised under the jurisdiction of the governing law clause and would undoubtedly face injunctive proceedings. However the risk is with dissentient creditors as we have highlighted above. Currently with only 40–70% of creditors supporting, who would additionally have a blocking vote to any scheme, it appears to us that there is a not insignificant risk of action in the place of incorporation and this may impact on the international effectiveness of a scheme in Hong Kong.”

34.  This paragraph makes little sense.  It certainly does not reconcile the inconsistency in Harneys’ advice, namely, that (1) only a scheme sanctioned in Hong Kong would as a matter of Cayman Islands law compromise the Hong Kong law debt and yet (2) it is desirable to introduce a scheme in the Cayman Islands.  It is difficult not to conclude that in framing his advice Mr Ridgers’s aim was to persuade the PLs that it was necessary to instruct his firm to cause a scheme to be introduced in the Cayman Islands.  It was not to provide an accurate answer to the question on, which Harneys’ advice had been sought.  In my view a scheme in the Cayman Islands was plainly not necessary in the present case and served only to generate fees for Harneys and reduce the amount available for Scheme Creditors.  In future if it is proposed that parallel schemes are introduced I will expect provisional liquidators or the Company to be able to justify doing so.

35.  There is a specific matter suggested in Mr Ridgers’s email, which requires comment.  Mr Ridgers suggests that generally the “proper approach should be for the implementation of a scheme in the home jurisdiction, together with a parallel proceeding … in Hong Kong…”.  In cases such as the present in my view this is plainly wrong.

36.  The Company operates a business primarily in the Mainland.  Its creditors are almost exclusively in Hong Kong.  It is listed in Hong Kong.  Its COMI is in Hong Kong.  The Company’s connection with the Cayman Islands is limited to it being the place in which it is registered.  It has no other connection.  One might ask why a business of this sort came to be listed on the SEHK using a Cayman Island company at all?  This I anticipate is a question that will be asked increasingly frequently as it becomes apparent to a widening circle of observers that the indiscriminate use of “letter box jurisdictions” as they are described by the European Court of Justice in [35] of the Court’s decision in In re Eurofood IFSC Ltd [16], is prejudicing the interests of creditors in Hong Kong and the Mainland when such companies encounter financial difficulties [17].

37.  What is quite clear is that the problems that have to be solved and the economic interests that have to be protected are firmly located in Hong Kong and the Mainland.  They are not located in offshore jurisdictions.  Schemes should be introduced in the jurisdiction, almost invariably Hong Kong, which is central to the protection of the interests of unsecured creditors.  Regard has to be had to the principles and policies, which guide Hong Kong’s courts in dealing with the introduction of schemes. This includes the Hong Kong Court’s approach to the use of soft-touch provisional liquidation.  In [31] of my decision in Re China Huiyuan Juice Group Ltd [18] and [17]–[18] of my recent decision in Re The Joint Provisional Liquidators of China Bozza Development Holdings Limited [19] I explain the development of the use of provisional liquidation in Hong Kong to restructure debt.  As I demonstrate in Hong Kong creditors have had a central role in the process.  I would add two further comments to what I said in my earlier decisions, which may help those less familiar with Hong Kong’s approach in this area to understand it better.

38.  The first is that the current absence of legislation that provides for some form of debtor-in-possession mechanism to address a company’s financial difficulties does not arise from inadvertence on the part of the Financial Services and the Treasury Bureau; although I anticipate some changes, in particular to section 193 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, may be forthcoming. The Hong Kong business community and employees organisations have historically been sceptical about debtor in possession processes.  This is part of the explanation for the method that had been available until the Court of Appeal’s decision in Re Legend International Resorts Ltd [20] being largely creditor driven.  It follows that recognition of soft-touch provisional liquidation commenced in the place of incorporation is dependent in part on this Court being satisfied that it will not result in a process, which is materially inconsistent with Hong Kong’s policy in this area.  In practice this means that the process must be conducted by independent professionals appointed by the court actively to manage the process with a high level of creditor involvement and primacy being given to the latter’s best interests.

39.  The other matter concerns the character of what is taking place when a listed company is put into soft-touch provisional liquidation; a process commonly referred to as “debt restructuring”; a convenient short hand expression, which I have used in many decisions.  It is, however, potentially misleading when used to describe a scheme of the sort that I have sanctioned in this case.  It implies that the terms of a company’s debt have been changed as part of some process to resolve a company’s immediate financial problems and allow it to continue business; for example, a change in tenor or interest rates.  The term is apposite in cases such as Re Kaisa Group Holdings Ltd [21], Re Winsway Enterprises Holding Ltd [22], and Re Mongolian Mining Corp [23] in which the schemes allowed the companies to continue their existing operations.  It is less so when used in a case such as the present.  In the present case the Company has been sold to an investor, which wishes to acquire a listed company.  The transaction necessitates a compromise and a release of the unsecured debt.  The Scheme achieves that result.  The Scheme does not restructure the debt in the conventional sense.  This distinction is not merely a matter of semantics or pedantry.  The distinction reminds us that in cases such as the present the economic interests of the owners of the original business are not so much peripheral, as largely irrelevant, except to the extent that they need to be involved in changes in capital structures and may need to be given some financial incentive to cooperate [24].  As an aside I note, that in the present case I have some reservations that the existing shareholders maintain a 15% interest in the Company, although not sufficient reservations to dissuade me from sanctioning the Scheme.  Once a listed company of the type, which is appearing in the Companies list in large numbers [25] is insolvent and the continuation of the existing business ceases to be viable, the interests of unsecured creditors become paramount.  If the board is not capable of taking the steps necessary to protect their interests either by realising assets, which are commonly in the Mainland or realising the value of the listed status, provisional liquidators need to be appointed capable of so doing.  As I have recently explained in Re China Creative Global Holdings Limited [26] if a company’s management are incapable of protecting the interests of unsecured creditors by taking steps to maximise the value of such assets the better course may be for the Company to be put into provisional liquidation in Hong Kong and, if needs be, restructuring powers can subsequently be granted if the provisional liquidators consider it advisable [27], which will avoid some of the issues that arise and the expense that will be incurred if soft-touch provisional liquidators are appointed in the place of incorporation.