CHINA CINDA (HK) ASSET MANAGEMENT CO., LTD v. SUNAC CHINA HOLDINGS LTD

HCCW 16/2025

[2025] HKCFI 965

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMI NISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 16 OF 2025

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REASONS FOR DECISION

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1.  On 28 February 2025 I granted to Sunac China Holdings Limited (“the Company”) a validation order in respect of transfers of its issued shares, insofar as they have been paid up or credited as fully paid up.

2.  The Company is a Cayman Islands company whose shares have been listed on the Main Board of the Stock Exchange of Hong Kong Limited (“SEHK”) since 2010.

3.  The Company encountered financial difficulties and underwent a debt restructuring, which included a scheme of arrangement (“the Scheme”) sanctioned by the Hong Kong court. See: Re Sunac China Holdings Ltd [2023] 5 HKLRD 765.

4.  Pursuant to the Scheme, certain creditors were entitled to and were issued mandatory convertible bonds (“MCBs”), which are convertible into shares in the Company.

5.  On 9 January 2025, the Petitioner presented a winding up petition (“the Petition”) against the Company based on a statutory demand.

6.  In February 2025, the Company issued shares upon conversion of some of the MCBs, and will issue more in due course. The shares in question are fully paid up or credited as fully paid up.

7.  The evidence is that in absence of a validation order, in view of the practice of the SEHK, the holders of the said shares would likely be unable to deposit their share certificates into the CCASS system of the SEHK.

8.  Accordingly, the Company issued a summons dated 12 February 2025, seeking an order that, notwithstanding the presentation of the Petition, all transfers of the issued shares of the Company, insofar as they have been paid up or credited as fully paid up, from the date of the presentation of the Petition shall not be void by virtue of section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) in the event of an order for the winding-up of the Company being made on the Petition.

9.  The Company submitted that the court routinely validates transfers of fully paid up listed shares, and that so long as the shares are fully paid up, there can be no prejudice to creditors.

10.  The Petitioner and the Official Receiver indicated neutral stances on the application, and did not attend.

Principles and Reasoning

11.  In respect of an application for validation of a transfer of shares, the court should ask whether or not the creditors might be better or worse off in the event of a winding-up order being made and the transfer not having been sanctioned. The object of section 182 of Cap. 32 in the context of share transfers, is to prevent a shareholder from evading its liability to contribute, by transferring its share to an impecunious party, to the prejudice of creditors.

12.  A transfer of fully paid up shares cannot generally be objectionable since the creditors would be no worse off by reason of the transfer.

13.  See: Re China Ocean Industry Group Ltd [2019] HKCLC 975 per Au-Yeung J at §§4 and 5; Re Alco Holdings Ltd [2024] 1 HKCLC 1 per Cheng J at §§3-5; Re Dexin China Holdings Company Limited [2024] HKCFI 1455 per Deputy High Court Judge Le Pichon at §§13-14.

14.  In the present case, the evidence is that all the shares issued or to be issued pursuant to the Scheme are fully paid up; and indeed the validation order sought covers only shares which are paid up or credited as fully paid up.

15.  For these reasons and in accordance with the above principles, I granted an order in terms of the draft presented to me.