RE CHINA TAIFENG BEDDINGS HOLDINGS LTD

HCCW 199/2018

[2018] HKCFI 1755

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 199 OF 2018

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D E C I S I O N

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1.  I have before me a petition issued by the Company the subject of the petition, China Taifeng Beddings Holdings Limited, for the Company to be wound up and also an ex parte application for the immediate appointment of provisional liquidators. The Company is incorporated in the Cayman Islands and listed on the main board of the Hong Kong Stock Exchange. I have explained to Mr Hui, who appeared for the Company on the application to appoint provisional liquidators, that I am not prepared to make an appointment today. The reasons are as follows.

2.  The decision to issue the petition was made by resolution of the board of the Company.  Article 101(1) (“Article”) of the Company’s Articles of Association sets out the powers of the board.  The first issue, therefore, that needs to be considered is whether or not the board had the power to initiate the presentation of the petition by the Company for its own winding up. 

3.  There is a recent decision of Judge Mangatal in the Cayman Islands in China Shanshui Cement Group Limited 2015 (2) CILR 255 in which the judge found that the articles of China Shanshui did not authorise the board to present a winding-up petition.  At risk of over‑simplifying the issue, the judge reached this conclusion applying the English decision in Emmadart [1979] Ch 540 and on the construction of the relevant article.

4.  I explained to Mr Hui that I found unconvincing the three‑page memo from Conyers Dill & Pearman containing an opinion expressing the view that the Article in the present case and the article in China Shanshui could be distinguished and, therefore, a different view could be taken on the powers of the board of this Company.

5.  It seems to me also that the issue of whether or not Emmadart applies in the Cayman Islands and if so, how, is a matter to be resolved by a Cayman Islands court, not by me on the basis of a three‑page opinion on an ex parte application. 

6.  The application could be pursued on the basis that Hong Kong law applies.  There is no decision in Hong Kong deciding whether or not Emmadart should be applied.  Different views have been taken by different courts in different jurisdictions, and determining that issue would require further research by counsel and a rather more comprehensive consideration of the issue than is possible today.

7.  The most straightforward way for the Company to deal with this technical issue is to find a friendly creditor to present a winding-up petition, the board could then resolve to apply to appoint provisional liquidators.  I do not think that that application would run into the Emmadart problem. 

8.  I am satisfied that, subject to the issue that I have discussed, this is a proper case to appoint provisional liquidators.  It also seems to me that as the board of the Company is presently involved in a restructuring exercise it is probable that any order appointing provisional liquidators could at its inception legitimately include restructuring powers. Generally, the present practice of the Company’s Court is that orders appointing provisional liquidators do not initially contain restructuring powers; those are only introduced after the provisional liquidators have familiarised themselves with the affairs of the Company and if they make an application to extend their powers.

9.  I will, therefore, adjourn the application.  It may be that any further application has to be heard by another judge.