RE HONG KONG JIN SHENG INDUSTRIAL GROUP LTD (in liquidation)

HCCW 469/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 469 OF 2007

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D E C I S I O N

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1.  This is an application taken out by Wang Zhen, a contributory of Hong Kong Jin Sheng Industrial Group Limited (“the Company”).  Mr Wang seeks an order under section 209 of the Companies Ordinance, Cap. 32 for an order that the winding-up order of the Company be stayed permanently.

2.  The Company was incorporated in Hong Kong in 2001, with an issued and paid-up capital of $10,000.  There are three shareholders, one of them being Mr Wang.  All three are the directors of the Company.  I understand the other two shareholders also support the present application.

3.  The Company is the holding company of a subsidiary in China and this subsidiary in turn holds two subsidiaries.  The subsidiaries in the PRC are engaged in the business of import and export in agricultural products and in the business of farming.  The principal objective of incorporating the Company was to act as a vehicle to facilitate the injection of capital into the Chinese subsidiaries from 14 investors by way of convertible notes issued by the Company.

4.  Between June 2006 and February 2007, the Company issued the convertible notes to 14 investors (“the Noteholders”) incurring a total debt of $30 million in principal amount.  The three shareholders and directors also personally guaranteed the outstanding amount.

5.  After the Company was wound up, Mr Wang decided to inject funds into the Company.  A deed of settlement dated 7 March 2008 was executed by Mr Wang’s agent on his behalf and the Noteholders.  It was agreed that a settlement sum of $22.3 million odd would be paid to the petitioning creditor and that the payment of the settlement sum shall be an absolute discharge of any obligation to repay the outstanding amounts under the convertible notes and the guarantees.  A deed of release and discharge was executed by the Noteholders on 7 March 2008 to release and discharge the obligations of the three shareholders and directors under the guarantees.  Pursuant to the deed of settlement, three cashier orders in favour of the petitioning creditor being the total of the settlement sum were delivered to the person nominated by the Noteholders.  So by 10 March 2008, all obligations of repayment under the convertible notes and guarantees were discharged, and the Noteholders ceased to be creditors.

6.  Mr Wang deposed to the financial position of the Company as appeared from the management accounts as at 31 March 2007 and the date of the winding-up order being 14 January 2008.

7.  Of the “other accounts payable” in the sum of $14 million odd, Mr Wang stated that this represented the monies he used to inject into the Company from time to time to support its investment and operation, and he has no intention to demand repayment in the near future.  Other than the Noteholders, whose debts were discharged, and Mr Wang, there is only one substantial creditor being the judgment creditors in High Court Action No. 1519 of 2007.

8.  A deed of settlement dated 21 April 2008 was executed by Mr Wang and the plaintiffs in that action, by which it was agreed that $3.75 million was to be paid to the judgment creditors as settlement money in full and final settlement of the judgment and all claims of these creditors against the Company.  These creditors have signed an acknowledgment of receipt of the settlement money on the same day, and a consent order was made in the High Court action, by which all claims in the action were dismissed.

9.  The provisional liquidators have filed a report to the court on 19 May 2008, and it is confirmed by Mr Wong of the provisional liquidators that he has no objection to the present application.

10.  The Official Receiver has also written to confirm that no matters have been reported to the Official Receiver requiring either prosecution action or disqualification proceedings.

11.  Mr Wang wishes to revive the Company so that it can continue to pursue viable business opportunities in China.  This is an appropriate case to exercise my discretion.

12.  I make an order that the winding-up order against the Company be stayed permanently.  A copy of my order should be delivered by the Company to the Registrar of Companies forthwith.

13.  I would also record that Mr Wang has in his supporting affirmation undertaken that the provisional liquidators’ expenses would be paid out of the assets of the Company, and that he is ready to finance such costs and expenses if the Company should have insufficient funds.