Re Rhino Toys Manufacturing Ltd.

HCCW338/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO.338 PF 1999

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R E A S O N S

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1. At the adjourned hearing of the creditor's petition to wind up Rhino Toys Manufacturing Limited ("the Company"), the application of the opposing contributories and the Company for a further adjournment was refused and a compulsory winding-up order made. The reasons appear below.

2. At the first hearing of the petition which took place on 8 June 1999, the petition was adjourned for four weeks to enable evidence to be filed concerning a proposed restructuring of the group of companies of which the Company is part, its parent being Innovative International (Holdings) Ltd. ("Holdings").

3. At the adjourned hearing, it transpired that the discussions between Holdings and the party then expected to invest in Holdings broke down in June 1999 and Holdings is in the process of locating other investors to inject new capital into it. By the time of the adjourned hearing, no new investor had been identified although discussions were being held with potential new investors. The Company sought an adjournment of a further four to six weeks to see how these discussions would develop. The court was also informed that the Company was at the same time trying to develop a self-rescue plan, a preliminary draft of which had been forwarded to the Steering Committee of the bank creditors in April 1999. However, as appears from the letter dated 23 June 1999 to update the creditors, it would appear that nothing has been done to advance this self-rescue plan since that date.

4. The adjournment was supported by the opposing creditors all of which are companies within the group. The Company's intra-group indebtedness is in excess of $67 million whilst the amount owing to the petitioning creditor is in the sum of approximately $2.4 million.

5. Whilst the support in number and value of the opposing creditors is a relevant consideration, it is not necessarily determinative. In the affidavits filed in support, the opposing creditors asserted that "Holdings is now undergoing restructuring". But that is not borne out by the facts. There is currently no restructuring : it is but a pious hope that one will somehow materialize. Significantly, no proposal has been put forward for the consideration of the petitioning creditor. As to the self-rescue plan, it is at best at an embryonic stage since nothing has been done to progress it for at least two and a half months.

6. In the circumstances, it would not be a proper exercise of my discretion to grant the adjournment sought notwithstanding the number and value of the debts of the opposing creditors. The wishes of the opposing creditors carry little weight when no proposal is even in the offing and therefore nothing for the creditors to consider. Since the debt is not disputed, the petitioning creditor is prima facie entitled to a winding-up order. The Company has already had a four-week adjournment : as no proposal is being put before the creditors, the need for the adjournment sought has not been made out. In these circumstances, the appropriate order is a compulsory winding-up order.