NANYANG COMMERCIAL BANK LTD. v. JIALING INVESTMENT DEVELOPMENT (CHINA) LTD.

HCCW614/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING UP PROCEEDINGS NO.614 OF 2000

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J U D G M E N T

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1. This is a creditors' petition based on an undisputed debt of just under $29 million. The petition is supported by HSBC who has advanced to the Company approximately $31.5 million. There are only three creditors, Standard Chartered who is the third creditor has not taken a position in this petition. The overall indebtedness is just over $82 million.

2. When the petition first came before me on 18 September, an adjournment was sought initially for five weeks because of the week-long holiday on the Mainland. The Szechuan Provincial Government is the main shareholder of this Company. The court was told that an audit had been carried out to find out the financial status of the Company which was essential to any long term planning.

3. The court granted a two-week adjournment because there was no evidence at the time of any concrete restructuring proposal - whether or not a restructuring was even viable was totally unclear. The Company was therefore given a fortnight to formulate its proposals and to show how serious any investor was about injecting funds into the Company.

4. In a case of this kind when there are only three creditors, the key matter was of course to solicit and obtain the support of the majority of the creditors in terms of indebtedness. The Company has not done that. It has filed a second affirmation which takes matters no further. Essentially no restructuring proposal has been formulated and what is now being sought is another two week adjournment in order for the Company, if it could come up with a restructuring proposal, to put it before the creditors and the court.

5. Companies have to understand that they are not entitled as of right to an automatic adjournment of four weeks for the purpose of presenting a restructuring proposal. They need to put concrete evidence before the court to show that there is a viable proposal and that they are not simply seeking to gain time. I am afraid this case falls within the latter category.

6. In the circumstances, the application for a further two week adjournment is refused and it follows that the appropriate order to make now is a winding-up order.

7. The petitioner's costs and the Company's costs be a liquidation expense.