RE LT COMMERCIAL LTD (In Creditors’ Voluntary Liquidation)

HCCW 261/2021

[2021] HKCFI 2867

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 261 OF 2021

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D E C I S I O N

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1.  I have before me an application to appoint Mr So Man Chun and Mr Jong Yat Kit as provisional liquidators of the Company. On 19 July 2021 the Industrial and Commercial Bank of China (Asia) Limited presented a petition seeking a winding up order against the Company. The Company had been put into creditors’ voluntary liquidation on 6 June 2013. The reason the petition, which is not opposed, has been presented is as follows.

2.  The most significant assets which the liquidators of the Company need to take control of are located in Beijing.  This involves taking control of subsidiaries of the Company whose Mainland management has proved uncooperative.  The liquidators have been advised that they are more likely to be able to progress the liquidation in Beijing if they are formally appointed by the Court in a compulsory liquidation process, which will give them the imprimatur of the Hong Kong High Court.  For this reason a major creditor has agreed to present the petition.

3.  The reason for applying to appoint provisional liquidators is largely practical.  If the Company is to be put into compulsory liquidation when the petition comes on before the court on 29 September 2021 and provisional liquidators have not been appointed, who will continue to act by virtue section 194 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, the Official Receiver will in the normal way become the first provisional liquidator and there would then be a hiatus while the Official Receiver puts in place arrangements to appoint private practitioners, presumably the currently proposed liquidators who are the liquidators in the creditors’ voluntary liquidation, to conduct the insolvency.

4.  I agree that in the circumstances, it is appropriate for the court now to appoint provisional liquidators in order that the insolvency of the Company can continue seamlessly.  The form of the order has, subject to one matter, been agreed between the Official Receiver and the Petitioner and I will make an order in the terms subject to one amendment.

5.  The current liquidators are the trustee in bankruptcy of Mr Yang Longfei, who is a creditor of the Company.  Apparently Mr Yang was a previous chairman of the Company.  The amount of his debt represents approximately 0.24% of the Company’s total debt.  In other words, it is in substantial and it is inherently unlikely that the liquidators would face any material conflict as a consequence of them being the trustee in bankruptcy of one small creditor.

6.  Section 262B(3)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, provides that except with the leave of the court a creditor of the Company should not be appointed provisional liquidator or liquidator.  The Official Receiver has pointed out, in my view properly, that pursuant to section 58(1) & (2) of the Bankruptcy Ordinance, Cap 6, the property of Mr Yang, a bankruptcy order having been made, vests in the trustee and, therefore, technically the liquidators are creditors of the Company and as a result subsection(3)(a) of section 262B is engaged.  It follows that leave of the court is required if the current liquidators in the voluntary liquidation are to be appointed provisional liquidators.

7.  This situation is similar to the one that arose in Re Gold Finance Holdings Limited[1], in which the possible conflict arose by virtue of the prospective liquidators also being liquidators of another company which was a creditor.  The creditor was a member of the Group of which Gold Finance was the holding company.  The debt was very small representing a similar percentage to that in the present case, 0.2%, and for the reasons explained in my short reasons it did not seem to me that this gave rise to a material conflict.

8.  For similar reasons it seems to me that this is a proper case for the court to give leave for Mr Yang’s trustees to be appointed provisional liquidators although technically they are creditors of the Company.  The order, therefore, needs to be amended by an insertion into [1] which expressly gives the leave of the court as required by section 262B(3)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, for the liquidators to be appointed provision liquidators.