RE HONG KONG PETROCHEMICAL COMPANY LTD

HCCW 454/2023

[2024] HKCFI 2603

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 454 OF 2023

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REASONS FOR DECISION

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The Liquidators’ application for a permanent stay of winding-up

1.  The Liquidators seek a permanent stay of the Company’s winding-up on the condition that the Company’s scheme of arrangement currently before the Court (HCMP 886/2024) (“Scheme”) becomes effective.

2.  Granting a permanent stay in conjunction with sanctioning a restructuring scheme of arrangement, conditional upon the scheme’s effectiveness, is an established practice, see, for instance, Re Zhu Kuan (HK) Co Ltd[1]; Re Ozner Water International Holding Ltd[2].

The background to the application for a permanent stay

3.  The Company’s background, liquidation and need for the Scheme are explained in my reasons in HCMP 886/2024 handed down on the same date as these reasons.

4.  The Scheme’s Conditions Precedents include (amongst others):

(1)  the Company’s liquidation being stayed permanently; and

(2)  the Liquidators being discharged.

Principles governing the grant of a permanent stay of a winding-up

5.  Section 209 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) confers on the Court the power to stay a winding-up permanently. Case-law has established the following principles governing the grant of a permanent stay:

(1)  the Court has regard to the interests of members, creditors and the liquidator;

(2)  the Court also considers whether the stay is conducive to commercial morality and the interests of the public at large;

(3)  if a stay is granted, whether all creditors and potential outstanding liabilities of the company are provided for.

See Re The Grande Holdings Ltd[3].

6.  Normally where unsecured debts have been compromised pursuant to a scheme of arrangement these conditions are readily satisfied: Re Hong Kong Mercantile Exchange Ltd[4].

Granting a conditional permanent stay here is consistent with the above principles

The Application in the present case

7.  The circumstances of the present case make a permanent stay, conditional on the Scheme’s effectiveness, appropriate for the following reasons. First, upon the Scheme becoming effective, all of the Company’s indebtedness will be either provided for or discharged, thereby rendering the Company solvent. Secondly, upon the Scheme becoming effective, all liquidation expenses will be provided for. Thirdly, the Liquidators have confirmed that they have completed the relevant investigations, thus mitigating any concerns about unresolved matters. Fourthly, allowing the Scheme to take effect will demonstrably serve the best interests of the creditors.

8.  The proposed mechanics for confirming satisfaction of the permanent stay condition follow a similar technique approved in Re Seapower Resources International Ltd[5] in the context of a conditional discharge of provisional liquidation:

“On 10 December 2002, an order was made in HCCW No. 1325 of 2001 that the petition for winding up the Company be dismissed, provided that such dismissal shall take effect from the date of and be conditional on the issue of the closing notice by the provisional liquidators to the Former Investors and that the provisional liquidators be discharged with effect from and conditional upon the issue of the closing notice.”

9.  I made an order in the following terms:

(1)  Upon the issuance of a written confirmation by the Liquidators to Qingdao Gon Technology Co., Ltd （青島國恩科技股份有限公司）(the “Investor”) and the Official Receiver that all the conditions precedent as contained in Schedule 1 of the Restructuring Agreement dated 2 April 2024 (save and except for the permanent staying of the winding up order and the discharge of the Liquidators) have been satisfied and/or waived by the parties (the “Written Confirmation”), there be a permanent stay of the winding up proceedings;

(2)  Upon the issuance of the Written Confirmation by the Liquidators to the Investor and the Official Receiver pursuant to paragraph 1 hereinabove, the Liquidators be discharged;

(3)  All monies standing to the credit of the companies liquidation account of the Company as maintained with the Official Receiver’s Office be paid by the Official Receiver to the New Co (as defined in the Scheme) to be held on trust by the New Co in accordance with Clause 7.1 of the Scheme; and

(4)  The costs of this application be paid out of the assets of the Company (which include the Company’s rights under the Restructuring Agreement dated 2 April 2024).