RE KOCH ASPHALT PRODUCTS (HONG KONG) CO LTD

HCCW 851/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 851 OF 2005

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J U D G M E N T

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1.  This is a petition presented against Koch Asphalt Product (Hong Kong) Company Limited (“the Company”) by one of its shareholders, on the grounds that the Company is unable to pay its debts and on the just and equitable ground.

2.  The Company was set up for the sole purpose of establishing a wholly foreign owned enterprise in the People’s Republic of China known as Zhengzhou Koch Asphalt Products Co Ltd (“Zhengzhou Koch”) for the production of asphalt.

3.  As at 14 July 2005, the Company was indebted to the petitioner in the sum of US$3,249,922.00 (“the Debt”), being a shareholder’s loan advanced to the Company.  On 14 July 2005, a statutory demand was served on the Company for the Debt.

4.  Zhengzhou Koch is insolvent and has ceased trading.  Its major bank creditor, The Bank of Tokyo Mitsubishi (“BTM”) has called a default under a facility provided and Zhengzhou Koch is unable to remedy the default.  Two major creditors had frozen almost all of the assets of Zhengzhou Koch to secure their claims, when this petition was presented to wind up the Company in November 2005.

5.  Further, there is an irretrievable breakdown in the relations between the petitioner and the other two shareholders.  I am satisfied that both grounds for winding up the Company have been made out.

6.  On 16 December 2005, provisional liquidators were appointed by this court for the Company, so that an independent person might take control and take such steps as appropriate to preserve the Company’s investments in Zhengzhou Koch.

7.  The petition has been adjourned several times since January 2006 for investigations to be carried by the provisional liquidators and to explore settlement negotiations between Sino Fame (H.K.) Limited (“Sino Fame”), which is one of the shareholders of the Company, and the creditors of Zhengzhou Koch.  The negotiations have not led to any settlement.

8.  On 22 November 2005, BTM filed a bankruptcy petition against Zhengzhou Koch with the Intermediate People’s Court of Zhengzhou.  Since its rejection of the settlement proposal of Sino Fame, BTM indicated to the provisional liquidators that it would prefer to have Zhengzhou Koch wound up.  The provisional liquidators have been given to understand that the Intermediate People’s Court is likely to accept the bankruptcy petition issued by BTM by 2 June 2006.

9.  Asphalt seized from Zhengzhou Koch has been auctioned and sold by the court in the Mainland, as well as all equipment, facilities and motor vehicles.  Proceeds from the sale have been applied to settle the costs of auction and the claims of creditors, and no realisation is available to Zhengzhou Koch.

10.  As Zhengzhou Koch is insolvent, it is unlikely there would be any distribution to the Company as shareholder.

11.  In these circumstances, the provisional liquidators recommend that the Company be wound up.  Further, as they believe that realisable assets are unlikely to exceed HK$200,000.00, they recommend winding up by way of summary procedure under section 227F of the Companies Ordinance, Cap. 32.

12.  It is appropriate that the Company be wound up by way of summary procedure, and I make an order in terms of the draft submitted to me by counsel