RE SHK HONG KONG INDUSTRIES LTD

HCMP 140/2021

[2021] HKCFI 1165

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANOUS PROCEEDINGS NO 140 OF 2021

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D E C I S I O N

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1.  This is the hearing of the Company’s Petition seeking the court’s sanction of a scheme of arrangement pursuant to sections 673 and 674 of the Companies Ordinance (Cap 622). The purpose of the Scheme is to privatise the Company which has been listed on the Main Board of the Hong Kong Stock Exchange. It has been listed since 21 December 1990.

2.  On 11 December 2020, Bright Clear Limited (the “Offeror”), a shareholder of the Company, requested the Board of the Company to put forward a proposal to Scheme shareholders for the privatisation of the Company by way of a Scheme of Arrangement to which I have referred.

3.  The proposal was announced by way of public announcement dated 11 February 2021.  An application was made to me by way the originating summons dated 29 January 2021 for an order convening the necessary court meeting at which shareholders could consider the proposed privatisation and vote on the Scheme of Arrangement.  As the Scheme, as is commonly the case, involves a capital restructuring which requires a reduction of capital, it was also necessary for the Company to hold a special general meeting at which shareholders could resolve to approve the necessary resolutions to reduce the Company’s capital, which they subsequently did.

4.  The court meeting was held on 12 March 2021.  For all practical purposes, those attending in person or proxy to vote on the Scheme of Arrangement passed the necessary resolutions unanimously.  In terms of precise figures, 98.79% of the voting rights attaching to the shares that were voted at the court meeting voted in favour of the Scheme, and 0.55% of the total voting rights attached to all disinterested shareholders voted against the resolution to approve the Scheme. There is one minor technical complication, concerning compliance with the order convening the meeting to which I shall refer later in this decision.

5.  The function of the court at the hearing of a petition to sanction a scheme of arrangement, including a scheme between a company and its shareholders intended to effect a privatisation, are as follows [1]:

“4. I have most recently considered the function of the court at the hearing of petition to sanction a scheme in my decision in Re Enice Holding Co Ltd [2018] 4 HKLRD 736:

‘37. The function of the court at the hearing of a petition to sanction a scheme is to consider:

(a) whether the scheme is for a permissible purpose;

(b) whether members who were called on to vote as a single class had sufficiently similar legal rights that they could consult together with a view to their common interest at a single meeting;

(c) whether the meeting was duly convened in accordance with the court’s directions;

(d) whether members have been given sufficient information about the scheme to enable them to make an informed decision whether or not to support it;

(e) whether the necessary statutory majority has been obtained; and

(f) whether the court is satisfied in the exercise of its discretion that an intelligent and honest man acting in accordance with his interests as a member of the class within which he voted might reasonably approve the scheme.

See Re Dorman, Long & Co Ltd;[2] Re China Light & Power Co Ltd;[3] Re Cable & Wireless HKT Ltd;[4] Re PCCW Ltd;[5] Re Wheelock Properties Ltd;[6] Re Cheung Kong Holdings Ltd;[7] and Re China Assets (Holdings) Ltd.[8]

38. First, it is well-established that privatising a listed company is a permissible purpose for a scheme of arrangement: see Re Wheelock Properties Ltd [9] and Re China Assets (Holdings) Ltd.[10]’

As is apparent from the above passage, privatising a listed company is a permissible purpose for a scheme of arrangement and many such schemes have been sanctioned by this court.”

6.  Privatising a listed company is a permissible purpose of a scheme of arrangement and there have been many in the last few years in Hong Kong.  However, as there are very few listed companies incorporated in Hong Kong, I assume that this may be one of the last petitions for a scheme of arrangement to privatise such a company.

7.  I am satisfied that the criteria that I have referred to are satisfied in the present case.  No dissenting shareholder has attended court and raised any objection to the Scheme being sanctioned.

8.  There is only one matter to which I have already alluded, which requires consideration, although, in my view, it is not capable of justifying the court declining to exercise discretion to sanction the Scheme and it concerns difficulties that were experienced in effecting service by airmail in respect of three overseas shareholders who in total held shares which at the offer price total in value HK$21,600.  This was, I have been told because of the suspension of airmail to some countries by Hong Kong Post.

9.  Unsurprisingly, the court will not decline to approve an otherwise satisfactory scheme of arrangement, because of a technical breach of a court order or the procedure specified either in the Ordinance or the rules for the determination of such applications.  Madam Justice Le Pichon summaries the positions as follows in her Ladyship’s judgment in Re Kansa General International Insurance Co Ltd (in compulsory liq)[11].

“A failure to comply with the court’s directions for convening a meeting will not ipso facto invalidate the proceedings at the meeting. The court has a discretion to waive a non-compliance with its directions. I am satisfied that in the present case, ‘the meetings had been in substance (though not precisely) summoned in the manner prescribed’. See per Romer J in Re Anglo-Spanish Tartar Refineries Ltd [1924] WN 222. No useful purpose would be served by convening further meetings. So far as may be necessary, any technical non-compliance with the court’s directions referred to above is waived.”

10.  Self-evidently, the failure to serve the requisite documents in accordance with the order is a technical defect of the sort, which the Court can quite properly waive.  I will, therefore, make an order in the terms of the draft that has been presented to me subject to certain minor amendments discussed with Mr Maurellet, sanctioning the Scheme of Arrangement.  The form of order is appended to this decision.

Appendix

Order

 

AND UPON UNDERTAKING OF the Offeror to be bound by the Scheme hereinafter sanctioned and to execute and do and procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed or done by it for the purpose of giving effect to the Scheme

THIS COURT HEREBY SANCTIONS the Scheme set forth in the First Schedule to the Petition and in the First Schedule hereto

AND THIS COURT ORDERED that the reduction of the share capital of the Company from HK$918,978,271.24 divided into 4,111,704,320 shares (fully paid or credited as fully paid) to HK$689,035,091.06 divided into 3,082,889,606 shares representing approximately HK$0.2235 per share (fully paid or credited as fully paid) resolved on and proposed to be effected by a Special Resolution duly passed at the General Meeting of the Company held on the 12^th day of March 2021 be and the same is hereby confirmed in accordance with the provisions of the above mentioned Ordinance

AND THIS COURT HEREBY APPROVED the Minute set forth in the Second Schedule hereto

AND IT IS ORDERED that this Order be produced to the Registrar of Companies and that an office copy hereof be delivered to him together with the said Minute and a return that complies with subsection (3) of section 230 of the Companies Ordinance

AND IT IS FURTHER ORDERED that Notice of the registration by the Registrar of Companies of this Order, of the Minute and of the said return, substantially in the form as set forth in the Third Schedule hereto, be published once in the English language in “South China Morning Post” and once in the Chinese language in “Sing Tao Daily” within 21 days after such registration.

AND IT IS FURTHER ORDERED that there be no order as to costs.