RE RENCO HOLDING GROUP LTD

HCCW 235/2025

[2025] HKCFI 3562

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING UP) NO 235 OF 2025

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REASONS FOR JUDGMENT

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1.  At the hearing of the petition presented by Tian Yuan Investment Holding Co., Limited (天元投資控股有限公司) (“Petitioner”) against Renco Holding Group Limited (融科控股集團有限公司) (“Company”), I made a usual winding up order against the Company. These are the reasons for my judgment.

Background

2.  The Company is a company incorporated in the BVI on 12 May 1998 and has been registered as a non-Hong Kong company since 13 May 2002. The Company’s shares have since 21 June 2002 been listed on the Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”) (stock code: 2323).

3.  The Company’s authorised share capital is HK$ 500 million divided into 5 billion shares of HK$0.10 each, of which 2,648 million shares have been issued.

4.  The petitioning debt arose in this way.

5.  On 30 September 2019, the Petitioner (as lender), Power Tiger Investments Limited (“PT”) (as borrower) and the Company (as guarantor) entered into a loan agreement (“Loan Agreement”) whereby the Petitioner agreed to grant a term loan facility of HK$ 660 million to PT repayable in 3 years from the date of drawdown with interest rate at 8% p.a. and default interest at 12.6% p.a.. Interest was payable on 19 June and 19 December of each calendar year. On the same date, the Company executed a Deed of Guarantee whereby it agreed to pay any outstanding sums upon demand by the Petitioner (“Guarantee”).

6.  On 9 and 10 December 2019, HK$ 610 million and HK$ 50 million of the loan were respectively drawn down.

7.  By a Set-off Agreement entered into on 1 January 2020 between the Petitioner, the Company, PT and 4 other companies (which were debtors of the Company and its subsidiaries), the parties agreed that the debt owed by the 4 companies to the Company and its subsidiaries be assigned to PT, and PT was entitled to set-off the same against the interest payable under the Loan Agreement. By the 1^st Supplemental Agreement dated 31 December 2020,[1] the parties agreed that the assigned debt was HK$ 250,616,365.68.

8.  On 19 June 2020, PT failed to pay interest. PT also failed to repay the principal on the maturity date of the Loan Agreement being 9 December 2022.

9.  By the Supplemental Agreement for Extension dated 1 January 2022, the parties agreed to extend the maturity date of the Loan Agreement to 31 December 2024.

10.  Despite repeated demands made on 24 January 2025, PT and the Company failed to repay the amount due and payable under the Loan Agreement (as amended).

11.  On 27 March 2025, the Petitioner through its solicitors served a statutory demand on the Company requiring it to pay the sum of HK$ 1,080,820,275.24 within 21 days thereof (“SD”). However, the SD did not take into account the parties’ agreements under the Set-off Agreement and the Supplemental Agreement for Extension. The Company did not comply with the SD.

12.  On 23 April 2025, the Petition was presented. As stated in the Petition, as at 22 April 2025, the outstanding amount due and payable by the Company amounted to HK$ 681,511,634.88 (“Debt”), details as follows:

Description	Amount HK$
Principal	660,000,000.00
Interest on HK$ 610 million from 9 December 2019 to 31 December 2024	247,342,465.75
Interest on HK$ 50 million  from 10 December 2019 to 31 December 2024	20,263,013.70
Default interest from 31 December 2024 to 22 April 2025	25,745,424.66
Less Set-Off under Set Off Agreement	(271,839,269.20)[2]
Outstanding Amount	681,511,634.88

13.  Notwithstanding the discrepancy in the amount of the debt stated in the SD and the amount stated in the Petition, there is no dispute that as at the date of the SD, a very substantial amount, in excess of HK$680 million, was due and payable by the Company to the Petitioner. As the Company failed to pay the amount indisputably due and payable, it is deemed unable to pay its debts by virtue of s.178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32).

14.  By email dated 3 August 2025 sent to the Petitioner’s solicitors, the Company confirmed that it had decided “not to appoint legal representation or file a defense [sic] in the coming hearing” and would not oppose the Petition.

Discussion

15.  The Company filed 2 affirmations[3] raising the following grounds in opposition to the Petition[4]:

(1)  There was an alleged “common understanding” and/or “Collateral Agreement” between the Petitioner and the Company, whereby (a) the Petitioner assumed responsibility of the Company’s customers/borrowers to procure repayments of their loans; and (b) the Debt would not be due/payable/enforceable unless (i) the Petitioner notified PT and the Company that it has been called upon by Shining Rhythm Limited to settle another debt owed by the Petitioner’s group to Huarong Group; and (ii) there is no outstanding indebtedness owed by the Petitioner and/or member of the Petitioner’s group to any member of the Company’s group[5].

(2)  There is a discrepancy between the SD and the Petition as to the amount of the Debt, thereby rendering both defective[6].

(3)  The Debt is secured by 275 shares in Jade Summit Holdings Ltd, an indirect owner of a property development project in Wuxi, PRC (“Project”)[7].

(4)  A winding up order in Hong Kong would not reasonably benefit those applying for it[8].

16.  There is no merit in the alleged common understanding and Collateral Agreement for the following reasons:

(1)  The alleged common understanding and Collateral Agreement is not supported by any contemporaneous evidence. As DHCJ Jin Pao SC observed at §42 in Leung Chin Sing, Rabo & Anor v Ko Chun Hay, Kelvin [2021] HKCFI 2242:

“It is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been purely by word of mouth but of which there is no contemporaneous documentary record of any kind. The prevalence of e-mails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint …”

(2)  The alleged common understanding and Collateral Agreement is contradicted by (a) clause 6.1 which stipulates “[t]he Borrower shall repay the Loan on the Maturity Date”; (b) the entire agreement under clause 18.2; and (c) the requirement of amendments in writing under clause 18.4 of the Loan Agreement.

(3)  The alleged common understanding and Collateral Agreement is a recent fabrication, given that (a) in the Company annual reports for the years 2019 to 2023, the Company referred to its liability under the Guarantee; and (b) after the Company received the demand letters and the SD, it made announcements on 25 March 2025, 3 April 2025 and 17 April 2025 admitting liability to pay the debt without any reference to the alleged common understanding or Collateral Agreement.

17.  As regards the discrepancy in the amount of the debt stated in the SD and the Petition, as submitted by Mr William Wong SC[9], a mere misstatement in the statutory demand or the petition on the amount of a debt will not by itself render either of them defective (Just Classic Ltd v Evershine Group Holdings Ltd (永耀集團控股有限公司) [2023] 1 HKLRD 1386, §§14-16). Under the Set-off Agreement, the set-off only goes to reduce the amount of interest owed by PT and the Company. There is no dispute that the Company owed at least the outstanding principal (HK$660 million) and a very substantial amount (HK$680 million) when the SD was served upon it, but it failed to pay the same to the Petitioner.

18.  As for the security over the Project, this was not provided by the Company. The Company accepted (rightly) at §7 of its Skeleton Submissions dated 27 June 2025[10] that “security by a third party cannot be an independent defence to the Petition”[11]. It is well established that the presence of security provided by a third party is not a defence to an action against the debtor or a winding up petition (Lau Yu v Hongkong and Shanghai Banking Corp Ltd [2019] 2 HKC 18 §35).

19.  In any event, it is doubtful if the Project has the value contended by the Company given that it appears to have been abandoned without any expected date of resumption.[12]

20.  There is no merit in the Company’s challenge as to jurisdiction:

(1)  The point was not raised in the Company’s submissions at the first callover hearing on 30 June 2025.

(2)  In any event, the 3 threshold requirements for the court to exercise its discretionary jurisdiction to wind up a foreign company, as expounded in Re Shandong Chenming Paper Holdings Ltd (2022) 25 HKCFAR 98, are clearly met.

(3)  The Company has sufficient connections with Hong Kong in that it (a) is listed on the SEHK, (b) has been registered as a non-Hong Kong company since 2002, (c) maintains a principal place of business in Hong Kong, (d) conducts its principal business in (i) treasury investments mostly in the Hong Kong stock market, (ii) provision of financial assistance to third parties in Hong Kong, and (iii) provision of financial services with license to carry on SFO regulated activities in Hong Kong and debt investments with collaterals such as Hong Kong listed shares. These facts point to a sufficient connection between the Company and Hong Kong[13].

(4)  There is a reasonable possibility of benefit from a winding up in Hong Kong. The Company has valuable assets within the jurisdiction. These included the listed equity investments of approximately HK$56.24 million across 3 stocks on SEHK (as at 31 December 2024)[14]. All but one of the Company’s directors and authorised representatives are subject to the jurisdiction of the Hong Kong courts since (a) they are Hong Kong residents with HKID cards; (b) in particular, Ms Xing, an executive director who made Xing 1^st and Xing 2^nd, is (i) a member of the Chartered Governance Institute since November 2023, (ii) a Certified Financial Consultant of the Institute of Financial Consultants, (iii) an SFC licensed person (Types 4 and 9 regulated activities), and (iv) an INED of another company listed in the Main Board of the SEHK; and she uses the Company’s registered Hong Kong address as her address in one of her affidavits in these proceedings. The liquidators appointed in Hong Kong would be able to enlist the assistance of these directors and officers to assist their investigation and administration of the affairs and assets of the Company.

(5)  There are creditors within the jurisdiction including at least the Petitioner and the supporting creditor.

(6)  While some of the above facts and matters concerning jurisdiction have not been pleaded in the Petition, I agree with Mr Wong’s submissions that pleading these facts for the purposes of establishing the 3 threshold requirements is a rule of practice, rather than a rule of law. The court may determine the issue even if the Petition does not expressly spell out how all the requirements are satisfied, so long as no unfairness is occasioned to any party and the petition can fairly be argued and determined without such averments in place (Re Up Energy Ltd [2025] HKCA 555 §51). There is no unfairness in the court holding that there is no merit in the jurisdiction challenge given that some of the facts have already been pleaded in the Petition and the Company at the last hearing did not pursue the point.