RE FOK YING TUNG MING YUAN DEVELOPMENT CO LTD

HCMP 2397/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2397 OF 2014

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J U D G M E N T
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The Application

1. On 26 September 2014 Fok Ying Tung Ming Yuan Development Company Limited (“Company”) issued a Petition for confirmation by the Court of the reduction of its issued and paid up share capital approved by a special resolution of the Company passed on 4 August 2014.  The special resolution was in the following terms:

“THAT, subject to and conditional upon confirmation of the capital reduction by the High Court of the Hong Kong Special Administrative Region (“the Court”) and the filing and registration by the Registrar of Companies in Hong Kong of a copy of the order of the Court and a copy of the minute approved by the Court:-

(1) the share capital of the Company be reduced from HK$3,105,000,000.00 to HK$1,953,045,000.00;

(2) the paid up capital of the Company be reduced to the extent of HK$371.00 on each of the issued and paid up shares;

(3) such reduction of capital be, to the extent permitted by an order of the Court and subject to such conditions (if any) as the Court may impose, effected by repaying to the shareholders paid-up capital, to the extent of $371.00 on each of the issued and paid up shares; and

(4) the directors of the Company be and are hereby authorised to do all such acts and things as considered by them to be necessary and desirable in connection with the implementation of the transactions contemplated in Paragraphs (1) to (3) of this Resolution.”

2. The form of the minute which the Company seeks to have registered at the Companies Registry reads as follows:

“(1) the share capital of the Company was reduced from HK$3,105,000,000.00 to HK$1,953,045,000.00;

(2) the paid up capital of the Company was reduced to the extent of HK$371.00 on each of the issued and paid up shares, and by returning the paid-up capital to the extent of $371.00 upon each of the 3,105,000 shares;

As at the date of registration of this Minute, the share capital of the Company is HK$1,953,045,000.00 divided into 3,105,000 ordinary shares, all of which shares have been issued and are fully paid‑up or credited as fully paid.”

3. On 4 November 2014 the Company issued a summons for directions seeking orders pursuant to s226(2) of the Companies Ordinance, Cap. 622 (“Ordinance”), dispensing with the preparation of a list of creditors and conventional directions for the hearing of the Petition and its advertisement.  When the summons first came on it was adjourned because one of the shareholders of the Company, Fok Lai Lor Nora, who holds approximately 4.34% of the Company’s issued shares representing approximately 5.5% of the shares voted at the extraordinary general meeting at which the special resolution approving the reduction of capital was approved, opposes the Petition.  I shall explain Ms. Fok’s grounds of opposition after I have explained more about the Company and its reasons for proposing to reduce its capital.

4. At the hearing before me the Company was represented by Mr. Ambrose Ho SC and Mr. Paul Leung.  Ms. Fok was represented by Mr. Winston Poon SC and Ms. Linda Chan SC.

Background

5. The Company was incorporated on 10 December 1999 under the former Companies Ordinance, Cap. 32, as a private company limited by shares.  Immediately before 25 October 2006, the Company’s capital was HK$10,000,000 and it had 9 shareholders, namely, Mr. Henry Fok, his sons (Mr. Fok Chun Wan Ian, Dr. Manson Fok and Mr. Fok Hin Kwong Danny), his employees (Mr. Ho Kin Lap and Mr. Ng Sau Shan), Mr. Ho (a long time acquaintance of Mr. Fok) and Mr. Ho’s nominees (Yeung Leung Yu and Ho Cheuk Wa).

6. The business of the Company had been funded by Henry Fok.  On 6 April 2006 he had advanced shareholder’s loan of approximately HK$3,520,000,000 to the Company (“Loan”). The Loan was purportedly gifted to Mr. Ho pursuant to a deed of gift on the same day (“Deed of Gift”).

7. Following an ordinary resolution passed on 25 October 2006 approving an increase in the authorised capital from HK$10,000,000 to HK$3,500,000,000, Mr. Ho applied part of the Loan in the amount of HK$3,095,000,000 towards payment of the 3,095,000 new shares of HK$1,000 each issued to the existing and new shareholders, which increased the number of shareholders to 25.

8. By a shareholders agreement dated 25 October 2006 (“Shareholders Agreement”) signed by 22 of the shareholders, but not Henry Fok, the parties agreed, inter alia:

8.1 To increase the authorised and paid-up capital to HK$3,500,000,000 and allot 3,095,000 new shares to 23 shareholders with the result that each of them would hold 135,000 shares in the Company: recital (G)(2)-(3) & Appendix 1.

8.2 To limit the scope of the Company's business to operating and supporting Nansha New Coastal City Development (“Nansha Development”) and to restrict the profit distribution and transfer of shares of the Company to ensure that the Company could provide the required capital for the development plans at Nansha Development: recital (H) & clause (1).

8.3 Within the first 10 years of the Shareholders Agreement, only 30% of its profits should be distributed to the shareholders as dividends and the remaining profits, after discharging the Company’s liabilities and making payments to the core staff and founding members (10% of profits), should be retained for the purposes of investment and development of the Company: clause (3)(a). 

8.4 Within the first 10 years of the Shareholders Agreement, if any shareholder died, his shares would be automatically gifted to Ming Yuan Nansha Foundation Ltd (a charitable organisation registered in Hong Kong) (“Foundation”) and, aside from gifting the shares to the Foundation, no shareholder was allowed to sell, transfer, mortgage or in any way deal with his / her shares in the Company: clause (5)(a)-(b).

8.5 All parties to the Shareholders Agreement agreed and mutually undertook to perform and abide by all terms and conditions therein and do their best endeavours to make the same effective: clause (6)(a).

9. The Shareholders Agreement was signed by Mr. Ho purportedly on behalf of Mr. Fok when he was in a Beijing Hospital.  Mr. Fok passed away 3 days later on 28 October 2006.  Mr. Ho has since confirmed to the Executors that he was not able to obtain consent from Mr. Fok prior to his signing the Shareholders Agreement on his behalf.

10. Ms. Fok suggests that given Henry Fok’s health he did not have the necessary capacity to execute the Deed of Gift.  The Executors have been investigating into the circumstances surrounding the execution of the Deed of Gift and the Shareholders Agreement.

Business of the Company

11. The business of the Company is to support the development of the Nansha Development.  Henry Fok came from Nansha and had been supporting the areas development for many years prior to his death. 

12. The Company is presently engaged, through its subsidiaries, associated companies or joint ventures, in 4 major projects in Nansha. The developments in Nansha are not complete.

Reasons for the reduction of capital

13. The reasons for the reduction given in paragraphs 14 to 18 of the Petition are as follows:

“14. The Board of the Company considers that the total capital of the Company is in excess of its needs and wants and can no longer be usefully employed in the business. The Reduction is designed to adjust the relation between the capital and assets of the Company.

15. As at 31^st December 2013, and according to the Company’s Reports and Financial Statements for the year ended 31^st December 2013, audited by Jonten Hopkins CPA Limited, Certified Public Accountants:-

(1) the equity of the Company, on a non-consolidated basis, was HK$2,356,452,615, representing share capital of HK$3,105,000,000 and accumulated loss of HK$748,547,385;

(2) the annual turnover of the Company on a consolidated basis for the 12 months ending 31^st December 2013 was HK$70,136,028;

(3) the annual loss before taxation on a consolidated basis for the 12 month period ending 31^st December 2013 was HK$26,636,836;

(4) the total current assets of the Company, on a non-consolidated basis, totalled HK$2,096,001,979;

(5) the total current liabilities of the Company totalled HK$661,901 and there was no non-current liabilities on a non-consolidated basis;

(6) the net assets of the company, on a non-consolidated basis totalled 2,356,452,615, and on a consolidated basis totalled HK$2,651,047,268.

16. The Company has no plans of expansion in the foreseeable future. After taking into account of the revenue, corresponding operating costs and financial commitments of the Company, the Board is of the opinion that the present share capital is considerably more than the future needs of the Company and that a share capital of HK$1,953,045,000 will be sufficient.

17. The total cash and cash balance standing to the credit of the Company’s bank accounts according to the aforesaid audited financial statements of the Company as at 31^st December 2013 was HK$2,055,571,779 on a non-consolidated basis.

18.  The total cash and cash balance standing to the credit of the Company’s bank accounts according to the management accounts of the Company as at 31^st July 2014 was HK$2,063,837,140.07.”

Relevant principles

14. The general principles governing applications for confirmation of reductions of capital are well established and I do not understand them to be in dispute[1]:

14.1 all shareholders must be treated equitably;

14.2 the reduction proposal must have been properly explained to the shareholders so that they could form an informed judgment upon it;

14.3 the creditors must be safeguarded; and

14.4 the reduction is for a discernible purpose.

Grounds of opposition

15. It is not suggested that the proposed reduction is not for a discernible purpose or that it would treat shareholders inequitably.  In my view these criteria are satisfied. Ms. Fok opposes the Petition on six grounds, which relate to the 2^nd and 3^rd criteria mentioned above and also the form of the resolution.  Those six grounds can be summarised as follows:

(1) Non-compliance with s.226(1) of the Ordinance in that no proper special resolution has been passed prior to presentation of the Petition.

(2) The Reduction was not properly explained to the shareholders at the extraordinary general meeting of 4 August 2014.

(3) Given the extensive disclaimers of opinion on the audited accounts of the Company, it is impossible for the Court to ascertain the true financial position of the Company or to determine whether the interests of the creditors can be properly safeguarded.

(4) The Special Resolution was passed by the majority shareholders in breach of the Shareholders Agreement, which remains binding on the shareholders.  The Court should not allow the majority shareholders to act in breach of their contractual obligation.

(5) The source of capital is questionable as it originated from the Loan purportedly gifted to Mr. Ho and, thereafter, used to pay the amount payable on the shares.  The executors of the estate of Henry Fok are still investigating the validity of the alleged gift.  It is inappropriate for the Company to return any part of the capital to the shareholders pending completion of such investigation. 

(6) The Company has on-going businesses and investments in Nansha, following the legacy of Henry Fok. As such, there is no proper basis to say that the capital is in excess of the needs of the Company.

The Special Resolution

16. S.226(1) of the Ordinance provides that a company may pass a special resolution for the reduction of share capital and apply to the Court for an order confirming the reduction.  S.229(1) provides that the Court may make an order confirming the reduction of share capital on any terms and conditions it thinks fit.  The expression “share capital” is not defined in the Ordinance.  The Company argues that it means a company’s issued and paid up share capital.  Mr. Ho points to the language of the Companies Registry’s annual return in which share capital is used to describe the paid up value of issued shares excluding any premium, as supporting this position.  In the present case the issued and paid up value of the shares was HK$3,105,000,000.  Accordingly the Special Resolution states that the “share capital of the Company” is HK$3,105,000,000 and this is what the Company at the extraordinary general meeting voted to reduce. 

17. Mr. Poon argues that this overlooks the fact that the Company’s balance sheet for the year ending 31 December 2013 records an accumulated loss of HK$748,547,385 and the total capital as HK$2,356,452,615.  This represents the share capital available for possible reduction.  It would be artificial to treat the issued and paid up capital as the share capital for the purposes of reduction when it is clear that at the time of the reduction and the registering of any minute it was known that it no longer represented the capital of the Company.  What the Company should have done was to structure the reduction in 2 parts, which could have been implemented by one resolution.  The first would be a reduction to write-off the accumulated losses and the second a reduction in order to make available capital for return to shareholders.  This is illustrated by the precedent on page 1008 of Palmer’s Company Precedents, which provides for exactly such a resolution.

18. Mr. Ho says that this argument confuses the amount of a company’s “equity” with the amount of its share capital.  It is correct, he accepts, that the amount of the Company’s “equity” was, at the time the Special Resolution was passed, less than HK$3,150,000, but this is not what is being reduced.

19. I agree with Mr. Poon.  The reason why reductions of capital have, until the recent introduction in s215 of the Ordinance of a mechanism for a reduction which does not involve the Court, required the confirmation of the Court, which in turn has involved careful scrutiny of the reduction in order to ensure that creditors are not prejudiced by it, is because of the assumption that creditors do business with a company relying on its capital as evidencing the amount available to them to satisfy debts owed to them.  This being the case it seems to me that the Court should approach any reduction on the basis that what it is sort to change is the amount of share capital carried in a company’s balance sheet at the time of the reduction.  It follows that if a company is carrying on its balance sheet an accumulated loss, which reduces its available capital this is the amount of share capital for the purposes of a reduction.  Mr. Ho has not drawn to my attention any case in which the Court has confirmed a reduction of capital which involves a return of capital to shareholders of a company, which after the reduction will continue to carry an accumulated loss on its balance sheet. It follows that the Special Resolution is defective and in my view the Court should decline to confirm it.  However, even if I were wrong in this view on what constitutes “share capital” for the purposes of ss226 and 229 of the Ordinance I would have declined to confirm the reduction for another reason connected with the language of the Special Resolution.

20. The Court’s main concern when considering a reduction of capital is to protect current creditors.  However, the Court will want to avoid confirming a reduction, which could in some way prejudice future creditors.  This is explained by Nourse J in at page 984D to 985E of his judgment in In re Grosvenor Press [2].

“In Poole v. National Bank of China Ltd. [1907] A.C. 229, 239, Lord Macnaghten recognised that the court might think that it ought to refuse its sanction to a reduction out of regard, as he put it, to the interests of those members of the public who might be induced to take shares in the company. This possibility was again recognised, although without comment or elaboration, by Lord Parker of Waddington in Caldwell & Co. Ltd. v. Caldwell, 1916 S.C. (H.L.) 120, 121. It was also recognised, and on that occasion extended to include the interests of future creditors as well, by the House of Lords in Ex parte Westburn Sugar Refineries Ltd. [1951] A.C. 625, which appears to be the only case where there has been any discussion on the point. In that case the proposed reduction was by way of a return of capital to shareholders on the ground that it was in excess of the company’s wants. Reasoned speeches were delivered by Lords Normand, Reid and Radcliffe, each of whom referred to the interests of future creditors and shareholders. Thus Lord Reid, in stating the duty of the court in considering a matter of this kind, said at p. 632:

‘And thirdly there is the public interest to consider: that this is a relevant consideration was clearly recognised by Lord Macnaghten in Poole v. National Bank of China Ltd. I would not be disposed, by attempting to define the public interest, to narrow in any way the discretion of the court in any future case. But in a case like the present I think that it is right to scrutinize the facts somewhat closely, having in mind the position of those who may in future form connections with the company as creditors or shareholders.’

Lord Radcliffe said, at p. 635:

‘If the transaction is itself competent the court should only refuse its confirmation if what is proposed to be done is somehow unfair or inequitable; and the consideration of what is unfair or inequitable cannot well extend beyond consideration of the interests of creditors, shareholders and the general public, by which term is, I think, meant persons who may in the future have dealings with the company or may be minded to invest in its securities.’

All three of their Lordships commented on the proposals in that case, but in the main their observations do not give general assistance in deciding in what circumstances and in what manner the interests of future creditors and shareholders ought to be safeguarded. Their observations were mainly directed to an excess of wants case. However, Lord Radcliffe said, at p. 637:

‘What are the actual circumstances of this case? The company is parting with these investments at the same value as they stand at in its books. If the reduction is effected, £45,192 (I ignore the funding loan for this purpose) disappears from one side of the balance sheet and the same amount from the other, in the form of issued share capital. There is nothing in this which, at first sight at all events, appears to threaten to confuse or mislead future traders or investors.’

And Lord Normand said, at p. 630:

‘But in an arrangement in which assets are taken at balance sheet values there is the possibility that the scheme of reduction may be used as a means of defeating or injuring the rights of creditors or deceiving future investors. If the retained assets are entered in the company’s balance sheet at a figure in excess of their real value, creditors may be prejudicially affected, and it may also be possible by adjustments in the balance sheet after the reduction takes effect to return paid up capital to shareholders.’

These remarks are of more general value. They emphasise that there should be no risk that the company’s accounts will deceive future creditors and shareholders.”

21. It seems to me that the quotes from the judgment of Lord Radcliffe and Lord Normand in Ex parte Westburn Sugar Refineries Ltd. [3] demonstrate the importance of the description of the reduction accurately reflecting the balance sheet in order that future creditors are not misled as to the capital of a company.

22. Capital reductions generally take place for one of two reasons.  The first is to reduce accumulated losses in order that the balance sheet more accurately reflects the financial position of a company and enables it to declare dividends, which it could not otherwise do until its accumulated losses have been eliminated. Secondly, a restructuring of capital to facilitate a change of ownership of a company or to change its domicile.  In the case of the latter I do not recall having encountered a case in which after the reduction the company continued to carry accumulated losses on its balance sheet.  It follows that any knowledgeable person, such as a corporate finance lawyer or accountant, reading the proposed minute recording the reduction of capital would be likely, quite reasonably, to assume that as at the date of the Special Resolution the Company did not have any accumulated losses.  This would be wrong and misleading.  For that reason I would not have been prepared to exercise my discretion to approve the proposed reduction of capital.

23. It follows that I am not minded to make the orders sought on the summons for directions.  The Company should either withdraw the Petition or apply to have it dismissed.

24. Although it is not necessary for me to address the other objections advanced by Ms. Fok I shall briefly say something about each of them.

Adequacy of the explanation of the reduction

25. The shareholders had the audited financial statements for the years preceding 2013 by the time of the extraordinary general meeting.  They were also given along with the notice convening the extraordinary general meeting the draft petition and supporting affirmation and an explanatory circular.  It seems to me that they contained sufficient explanation of the financial state of the Company and the reasons for the proposed reduction of capital in order for a shareholder to make an informed decision to support or reject it.

The adequacy of the financial statements

26. A peculiarity of the present case is that the audited financial statements put before the Court all contain disclaimers of opinion.  The Hong Kong Institute of Certified Public Accountants Standard on auditing 705 explains in paragraphs 9 and 10 on page 5 when an audit report should contain a disclaimer of opinion:

“9. The auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive.

10. The auditor shall disclaim an opinion when, in extremely rare circumstances involving multiple uncertainties, the auditor concludes that, notwithstanding having obtained sufficient appropriate audit evidence regarding each of the individual uncertainties, it is not possible to form an opinion on the financial statements due to the potential interaction of the uncertainties and their possible cumulative effect on the financial statements.”

27. The Court relies heavily on audited financial statements in assessing the financial state of a company as part of the process of evaluating a petition to confirm a reduction of capital.  In my experience petitioners seek, sensibly, to adduce in evidence financial statements made up as close to the date of the Petition as possible and these almost invariably have clean audit reports, although the Court would probably not feel inhibited about relying on an audited financial statement with a limited or narrow qualification.

28. In the present case I have been presented with financial statements, about which the auditors have sufficient concerns that they have felt, consistent with the requirements of the accounting standards quoted above, obliged to decline to express a view on whether or not they contain a true and fair statement of the financial position of the Company.

29. What the reasons for the disclaimer demonstrate is that the directors of the Company have failed to provide sufficient information to the auditors about the asset owning subsidiaries for the auditors to feel able to express a view on the value of the Company’s interest in those subsidiaries and that this calls into question the reliability of the financial statements as a whole.

30. Mr. Ho argued that the auditors were only concerned with the particular matters listed in the disclaimer and invited me to approach the financial statements on the basis that the remainder of the financial statements were satisfactory.  He took me to Daniel Kung’s (of the auditors) lengthy letter of 24 April 2015 in which in paragraph A4.5 he explains as follows:

“In the case of the Company, the Auditor issued a disclaimer on the Audited Statements. The major reason for the disclaimer of opinion was due to a lack of cooperation from the Company’s investee companies and not because of any evidence indicating that the Audited Statements were materially wrong or not showing a true and fair view.”

31. Section 379(1) of the CO requires the directors of a company to prepare for each financial year statements that comply with sections 380 and 383.  Section 380(2) requires that financial statements must give a true and fair view of the financial position of the company and all its subsidiary undertakings and the financial performance of the company and all its subsidiary undertakings.  Clearly the auditors are not satisfied that the consolidated financial statements do satisfy these requirements.  Section 379 makes it an offence to send to any member or lay before a company in general meeting any financial statements that do not comply with section 379(1). 

32. The audit report declines to express a view on whether or not the financial statement of 2013, and earlier, represent a true and fair view of the financial state of the Company.  The passage I have quoted from the auditors’ letter is saying that they did not find any evidence (as I understand it, in the sense of positive evidence) that the financial statements were materially wrong or did not show a true and fair picture of the financial state of the Company.  This is not the point.  What the Court needs is positive confirmation that they do express a true and fair view and this, by their disclaimer, the auditors declined to do. Not only did they decline to do so for 2013, but they also did so for 2014. Another unsatisfactory of the way in which the accounts have been dealt with was the reliance on management accounts from 31 December 2013 onwards.  I asked during the hearing why financial statements for 2014 had not been audited. I was told they had been and only then was I handed a copy of the financial statement, which evidences a failure to appreciate the extent to which the Court requires up-to-date audited financial statements.  They also contain a disclaimer of opinion, which commences with the following paragraph:

“1. Comparability and corresponding figures

  The audit opinion on the consolidated financial statements of the Company for the year ended 31^st December, 2012, which form the basis for the corresponding figures presented in the current year’s consolidated financial statements, was modified because of the disagreement of the accounting treatment on consolidated financial statements and the possible effect of the limitations on scope of our audit including goodwill, subsidiaries’ and associates’ financial information, amounts due with related companies, interests in associates and investment in subsidiary. Details of the above-mentioned modified audit opinion are set out in the independent auditor’s report for 2012. Our opinion on current year’s consolidated financial statements is also modified because of the effect of the matter on the comparability of the current year’s figures and the corresponding figures.”

33. The Court cannot rely on the audited financial statement for the year ending 31 December 2013 or 2014.  The Court is being asked to assess the financial statements (without the benefit of the books and financial records of the Company) and to satisfy itself that the Company is solvent and that it has cash available to distribute if the capital reduction is approved.  As I observed during the hearing, I am effectively being asked to do what the directors would have to do if they decided to reduce capital pursuant to s215 of the CO by assessing solvency and the amount of liquid assets available for distribution.  It does not seem to me that this is the correct approach for the Court to take.  The Court does not have access to the books and records of the Company or have the directors’ background knowledge or understanding of its affairs.  The Court should be able to rely on up-to-date audited financial statements that are either unqualified or contain limited and immaterial qualifications.  If a company’s directors are not able or willing to ensure that s379 has been complied with it does not seem to me that they are in a position to make a satisfactory application to the Court for the confirmation of a reduction capital and the Court should decline to grant one.  It is relevant in my view that the directors had the alternative of making solvency declarations and effecting a capital reduction that way.  If they wish to have the additional protection of confirmation by the Court they should ensure that s379 is complied with and that they can present to the Court satisfactory and up-to-date audited financial statements. 

Breach of the Shareholders Agreement

34. Ms. Fok argues that the Shareholders Agreement envisages the Company financing developments in Nansha indefinitely.  It provides that during the first 10 years in which shareholders hold shares in the Company they are unable to dispose of them and if they die the shares pass to a trust established by Mr. Fok.  Ms. Fok says that the return of capital would be a way of shareholders extracting value from the Company during a period when their economic interest in the Company is restricted by prohibition against transfers and to allow it would be to circumvent the restriction and go against the intention for which the Company was established and to which the shareholders agreed when the Shareholders Agreement was signed.

35. I accept that much of the Shareholders Agreement suggests that the purpose of the Company is to continue to be involved and finance developments in Nansha, but it also recognises that the board of directors may decide not to continue to do so.  Clause 4(i) provides that if 9 members of the board vote for a resolution to convene a general meeting the shareholders of the Company in general meeting can resolve to wind up the Company.  They can also resolve to change the profit distribution, which is limited to a return to 30% of profits by way of dividends to shareholders in the 10 years subsequent to the making of the Shareholders Agreement.  It is, therefore, open to the shareholders to decide not to retain profits in order to finance future developments, and I note that the board is not obliged to embark on new developments, and, if the shareholders so decide, to liquidate the Company and return capital to them by that means.  It, therefore, seems to me that shareholders who support the reduction would not be in breach of the Shareholders Agreement. 

The source of the Company’s capital

36. Whatever “questions” Ms. Fok may have about the circumstances in which Mr. Ho came to be gifted the loan originally made by Henry Fok to the Company, it seems to me clear that no evidence has been adduced before me, which calls into question the probity or competence of the transfer of the loan into Mr. Ho’s name.

The need to retain capital

37. The Company proposes to retain capital of approximately HK$178,000,000 in order to finance its continuing interest in developments in Nansha.  Ms. Fok questions whether this is sufficient.  Her concerns seem to turn largely on her assumption that the Company should be continuing to assist in the further development of Nansha and, accordingly, it needs sufficient capital to do so.  It seems clear that the current board, and all the shareholders other than Ms. Fok, do not intend that the Company embark on new projects and I can see no basis for concluding that in addition to the Company’s deposits pledged to banks financing existing projects, which are not included in the calculation of retained available capital, the amount the Company proposes to retain will be insufficient.

Conclusion

38. As I indicated earlier in this decision I will not make an order on the summons for directions other than directions for the withdrawal or dismissal of the Petition.  I make an order nisi that the Company pay Ms. Fok’s costs with a certificate for 2 counsel on a party and party basis such costs to be taxed if not agreed.