RE GRAND PEACE GROUP HOLDINGS LTD

HCCW 410/2019

[2021] HKCFI 1563

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 410 OF 2019

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D E C I S I O N

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1.  I have before me a petition issued on 19 December 2019. The petition seeks to wind up the Company which is listed on the GEM Board of the Stock Exchange of Hong Kong. The petition is clearly demurrable as it does not set out the basis upon which it is asserted that the three core requirements which a petitioner needs to satisfy before a court will exercise its discretion to wind up a foreign incorporated company are satisfied.

2.  The Petitioner has had this pointed out to him at previous hearings, but has taken no steps to amend the petition.  I am told this is because the Petitioner has been willing to accede to the Company’s request for an adjournment for time to attempt to restructure the Company’s debt.  The progress of the attempted restructuring has been slow and the Listing Committee of the Stock Exchange has recently determined that the Company should be delisted.  That decision is being referred by the Company to the Listing Review Committee.  Against this background, a supporting creditor has applied for substitution in order that an amended petition can be advanced which addresses the jurisdiction issue properly.

3.  The Company and the supporting creditor—Chan Tsik Yan—have agreed directions for the substitution application to be determined.  The application will determine the substantive dispute relating to jurisdiction. The Petitioner’s position in relation to the substitution application is, I think all I need to say, slightly equivocal.  I have, therefore, made an order for directions leading to a hearing on 5 August 2021.

4.  There are two peripheral matters which I will take this opportunity to comment on.  The first has been raised by Mr Ho on behalf of the Company.  He has asked whether the court will be willing to entertain an application for an order for a meeting of creditors to be convened for consideration of and voting on a scheme of arrangement.  I have previously in Re Burwill Holdings Ltd [1] indicated that the court will not hear a petition to sanction a Scheme when a determination by the Listing Review Committee is pending.  However, it seems to me that an application for an order that a meeting of creditors is convened will normally fall into a different category, and the court will be amenable to making such an order unless the court is concerned that the interests of unsecured creditors might be prejudiced, which is most likely to arise if the Company proposes to pay the costs itself.  Commonly, however the costs will be paid by the prospective investor.

5.  The second is a matter which this case gives an opportunity for me to bring to the attention of Practitioners.  As explained, for example, in the decision of DHCJ William Wong SC in [46]–[53] of Re Da Yu Financial Holdings Limited [2], the current practice of introducing parallel schemes of arrangement in Hong Kong and the place of the Company’s incorporation to restructure the debt of the kind of listed company of which the present is an example, would seem generally to be unnecessary and result in an escalation in legal fees which is not in the interests of unsecured creditors.

6.  Companies such as the present have their assets in Hong Kong and the Mainland, and their debt is normally governed by Hong Kong law. It, therefore, follows that a scheme of arrangement sanctioned in Hong Kong which compromises the debt would normally be expected to be recognised in common law jurisdictions with similar principles to Hong Kong guiding recognition including the well-known English Court of Appeal decision in Antony Gibbs Sons v. La Société Industrielle et Commerciale Des Métaux [3].

7.  I can see very little justification in most cases for a scheme being introduced in the place of incorporation.  In future, I will need to be satisfied by any company or provisional liquidators who propose that parallel schemes are introduced that it is in the genuine best interests of unsecured creditors, that a scheme is introduced in the Company’s place of incorporation.