RE KEITSU JOY PACK ENTERPRISE (H.K.) LTD.

HCMP 2814/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2814 OF 2005

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REASONS   FOR   JUDGMENT

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1.  This is a petition presented by Keitsu Joy Pack Enterprise (H.K.) Limited (“the Company”) to confirm a reduction of its capital.

2.  The Company was incorporated on 11 October 1973 under its former name.  It is a wholly subsidiary of Humax Corporation, a company incorporated in Japan.  Shortly after its incorporation, the Company commenced and has since continued to carry on business.  The principal activities are investments in quoted foreign shares and landed property outside Hong Kong.  The Company has not commenced business in Hong Kong.

3.  The present authorised capital of the Company is HK$19,000,000.00, divided into 1,900,000 ordinary shares of HK$10.00 each, all of which have been issued and are fully paid.

4.  There is power in the articles of association to reduce the capital of the Company.

5.  By a special resolution of the Company passed at an extraordinary general meeting on 28 December 2005, it was resolved that the authorised capital be reduced from HK$19,000,000.00 to HK$3,800,000.00 divided into 380,000 ordinary shares of HK$10.00 each, and that such reduction be effected by returning to the shareholders paid up capital to the extent of HK$10.00 per share in cash in respect of each of the 1,520,000 issued shares.

6.  The directors are of the opinion that the sum of HK$15,200,000.00 proposed to be returned to the shareholders is in excess of the wants of the Company and can no longer be usefully employed in its business.

7.  According to the audited accounts for the year ended 30 September 2005, the net assets of the Company stood at US$4,268,212.56, cash at bank was in the sum of US$3,334,990.21.

8.  The bank balance to the credit of the Company’s accounts in Japan as at 12 January 2006 was US$1,370,025.42 and Ұ281,254,826.00 (equivalent to US$2,500,042.90), in the total sum of US$3,870,068.32.

9.  The Company has only borrowed from its parent company and not from any outside creditor.  The loan of US$1 million recorded as a current liability in the audited accounts has been loaned to the Company by Humax Corporation for a long time.  The purpose of the loan was to serve as a financial back up, just in case the Company should require it.  The Company has not utilised the loan and the amount has been recorded as a current liability in its accounts year after year.

10.  The shares of the Company are held by Zuisho Hayashi and Humax Corporation, the latter is owned by Zuitei Hayashi and Zuiho Hayashi.  The three are brothers.  They wish to retire and not to participate in any further business activities, as they are all of an advanced age.  It is intended that Zuisho Hayashi is to remain as the sole director and that the business volume of the Company will be reduced.

11.  Humax Corporation has issued a letter dated 18 March 2006 confirming that all the outstanding balance due to it from the Company as at 30 September 2005 has been repaid and it has no claims or debts whatsoever against the Company.

12.  After this repayment, the Company would still have sufficient assets for the purpose of the proposed return of capital.  According to the management financial statements for the period ended 17 March 2006, current liabilities amounted to US$6,300.00, net assets came up to US$4,713,949.38 and cash at bank stood at US$3,349,100.96.  The Company would appear to be financially sound.

13.  At the hearing of the summons for directions on 18 April 2006, an order was made to dispense with the settlement of a list of creditors.  The directions made for the advertisement of a notice of the presentation of the petition have been complied with.

14.  The criteria for the exercise of the discretion to confirm a reduction of capital have all been satisfied.  Members will be treated equitably in the proposed reduction and they clearly understood the nature and purpose of the reduction.  The reduction is for a discernable purpose and the interest of creditors is not likely to be prejudiced.

15.  I have made an order confirming the reduction of capital as proposed.