RE BLOXWORTH ENTERPRISES (HK) LTD

HCMP 2219/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2219 OF 2013

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D E C I S I O N

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1.  This is an application for an order that all proceedings in the winding up of the company pursuant to a creditors’ resolution dated 26 February 2010 to wind up the company be stayed altogether, permanently.

2.  The application was made under section 255 of the Companies Ordinance which empowers the court to exercise powers in relation to a voluntary winding-up that the court may exercise if the company were being wound up by the court.  Under section 209(1) of the Companies Ordinance: 

“The court may at any time after an order for winding-up, on the application either of the liquidator or the Official Receiver or any creditor or contributory and on proof to the satisfaction of the court that all proceedings in relation to the winding-up ought to be stayed, make an order staying the proceedings either altogether or for a limited time on such terms and conditions as the court thinks fit.”

3.  The company was a wholly-owned subsidiary of China Packaging Group Company Limited, a company listed on the main board of the Stock Exchange of Hong Kong.  On 2 October 2009, provisional liquidators were appointed in respect of China Packaging for the purposes of considering, working out and implementing rescue operations for that company.

4.  The company that is the subject of this application was itself put into voluntary liquidation pursuant to section 228A of the Ordinance on 5 October 2009, when its then sole director filed a statement of voluntary winding-up pursuant to that section. 

5.  On 26 February 2010, the creditors of the company passed resolutions to put the company into creditors’ voluntary liquidation and appointed the present liquidators as liquidators of the company. 

6.  The restructuring that the provisional liquidators were appointed to consider and implement eventually came to fruition in the form of a scheme of arrangement entered into by China Packaging and its creditors.  The scheme was sanctioned both by the court in Cayman Islands and by the court in Hong Kong pursuant to section 166 of the Companies Ordinance.  Pursuant to the scheme, the scheme creditors compromised their claims against China Packaging in consideration of distribution of, among other things, first, cash made available to the scheme creditors by an outside investor and, secondly, proceeds from realisation of the assets of China Packaging, being its subsidiaries, including the company.  These assets were to be transferred by China Packaging to a special purpose vehicle, Sino Gather Limited, which was controlled by one of the scheme administrators who are also the liquidators of the company for the purposes of the restructuring.

7.  In November 2011, pursuant to the scheme, the company was duly transferred by China Packaging to Sino Gather for a nominal amount.  Since then, there have been attempts by the scheme administrators to realise the value of the assets transferred into Sino Gather for the benefit of the scheme creditors.  In particular, offers have been received for the acquisition of the company from Sino Gather.  A recent offer has been received to acquire the company for HK$2 million.  That offer has proved attractive to the scheme creditors as represented by the Scheme Creditors Committee.  In fact, the Scheme Creditors Committee members have unanimously resolved to accept that offer.  An agreement has been entered into by Sino Gather to transfer the company to the purchaser, the completion of which is conditional on a number of matters, including an order of the court for the stay of the winding-up of the company on a permanent basis.

8.  The principles applicable to an application for a stay of a winding-up are established.  In Re Outboard Marine Corp (Asia) Limited [2003] 1 HKLRD 585 at paragraph 6, Kwan J, as she then was, said this:

“The power to grant a stay of winding-up proceedings is discretionary. The burden is on the applicant to make out a sufficient case for a stay that carries conviction (Re Calgary v Edmonton Land Company Limited (in liquidation) [1975] 1 WLR 355 at 358H-359A). Before granting a stay, section 209(1) requires ‘proof to the satisfaction of the court that all proceedings in relation to the winding-up ought to be stayed’. Hence it is not merely sufficient for the applicant to establish that a stay is reasonable in the circumstances. He must satisfy the court that it ought to grant a stay (Krextile Holdings Pty Ltd v Widdows [1974] VR 689 at 694). Where there are sufficient assets to pay all the creditors and the expenses of the liquidation, the interests of the members, in addition to those of the creditors and the liquidator, would be considered (Re Calgary v Edmonton Land Company Limited (in liquidation) at page 360C-G). The court would also consider whether the stay is ‘conducive or detrimental to commercial morality and to the interests of the public at large’ (Re Telescriptor Syndicate Limited [1903] 2 Ch 174 at 180; Krextile Holdings Pty Ltd v Widdows at pages 694-695; Wotta Company Limited & Another v Thomas Brian Stevenson & Another (unrep., HCMP No 3965 of 1999).”

9.  In the present case, the sole shareholder of the company, Sino Gather, has given its consent to the application.  Sino Gather is, of course, only a special purpose vehicle through which the scheme administrators hold the former assets of China Packaging for the purposes of the scheme creditors.  The real beneficiaries are the scheme creditors who have also, as represented by the Scheme Creditors Committee, given their consent to the present application.

10.  There were three debts of the company which was hopelessly insolvent.  Two of the debts were owed to sister companies and have since been assigned to Sino Gather.  The other debt was owed to the former provisional liquidator of the company appointed pursuant to section 228A of the Companies Ordinance.  Both of these creditors have either waived or undertaken to waive the debts owed by the company upon the stay of winding-up being granted herein.

11.  There are, as it seems to me, genuine commercial reasons for seeking a stay of the winding-up on a permanent basis, the intention being to transfer the company as a going concern to a third party in return for a monetary consideration for the benefit of the scheme creditors.

12.  Finally, the liquidators have undertaken, through their representative, to the court to file an affirmation confirming what their representative has stated to the court this morning, namely that, to their knowledge, there is no irregular matter or transaction in relation to the company that needs investigation, nor any misconduct on the part of any former officers of the company. 

13.  In these circumstances, I am prepared to grant the permanent stay of the voluntary liquidation as sought by the liquidators and there will be an order accordingly. 

14.  There will be an order in terms of the notice of motion upon the undertaking discussed.