CHINA INTERNATIONAL BUSINESS DEVELOPMENT (HONG KONG) LTD v. CHONG CHI YEUNG AND OTHERS

HCCW 603/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 603 OF 2001

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D E C I S I O N

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1.  This is an application by the liquidators of China International Business Development (Hong Kong) Limited (“the Company”) for an order that the winding-up order made on 14 February 2005 against the Company and all further proceedings in the winding up be stayed permanently, pursuant to section 209 of the Companies Ordinance Cap. 32 and for the release of the liquidators under section 205.

2.  Chong Chi Yeung, Hui Ming Yeung and Like Grand Holdings Limited, being the 1^st, 2^nd and 4^th respondents herein, are the shareholders of the Company.  The 3^rd respondent, Lee Wing Kee, is a director of the Company and a shareholder and director of the 4^th respondent.

3.  The backgrounds matters may be stated as follows.

4.  The Company was incorporated in Hong Kong on 31 January 1992, it was dormant in the first four years after incorporation.  In early 1996, the Company began to participate in a sightseeing car project in Xiamen, Fujian Province, in the PRC.  A sino-foreign joint venture known as Xiamen Yongshun Sightseeing Car Limited （廈門永順觀光車有限公司; “Xiamen Yongshun”) was set up for the business.  On 15 June 2001, the 1^st and 2^nd respondents presented a petition to wind up the Company under sections 168A and 177(1)(f) of Cap. 32.  The Company was ordered to be wound up by the court on 14 February 2005, and the liquidators appointed by a court order dated 25 August 2005.

5.  The only known valuable asset of the Company is its investment in Xiamen Yongshun.  During the period of liquidation, Xiamen Yongshun continued operations under the supervision of the liquidators.  Audited financial statements showed that the business of Xiamen Yongshun in recent past years has apparently generated profits.  On 25 April 2006, the liquidators received a dividend from Xiamen Yongshun in the sum of $424,169.14. 

6.  The 3^rd respondent is the only person who has submitted a proof of debt in this liquidation making a claim of $2,344,183, being a capital injection to Xiamen Yongshun as due to him by the Company.  In the statement of affairs submitted by the 3^rd respondent, it was claimed that the Company might be subject to a claim of $50 million by the Chinese partner of Xiamen Yongshun, being the loss of guaranteed income for the remaining twenty-one years under the joint venture contract.  It is expected that the Company should not be subject to any liability in respect of the above, if the winding-up proceedings could be stayed.

7.  Heads of Terms dated 16 October 2006 were entered into between the Company, the 1^st to 4^th respondents, the liquidators and ONC Consulting Limited, by which the 1^st and 2^nd respondents agreed to sell all of their shares in the Company to the 4^th respondent at the total consideration of $4.8 million, on condition that an order to stay the winding-up proceedings of the Company is obtained from the court.

8.  If the court grants an order to stay the winding-up proceedings, the Company would be in a solvent financial position, as it is expected in that situation the Company should not be subject to any liability in respect of the potential claim for damages by the Chinese partner.

9.  If liquidation is to continue, the liquidators are of the opinion that in view of the opposition of the Chinese partner, it is uncertain if they could successfully realize the beneficial interest of the Company in Xiamen Yongshun and the quantum, if any, that could be recovered in a forced sale situation is unclear.  And after deducting debts and liabilities, it is highly unlikely there would be any funds available for distribution to the shareholders.

10.  Under the Heads of Terms, the 1^st and 2^nd respondents would each receive $2.4 million for their shares in the Company from the 3^rd and 4^th respondents, if the court is to grant an order to stay the winding-up proceedings permanently.

11.  The liquidators have made investigations into the affairs of the Company and they produce a report dated 18 May 2009.  There is no outstanding matter that warrants investigation.  I am given to understand the delay in making this application to stay the winding-up proceedings permanently was due to the investigation carried out by the liquidators to ensure there would be no outstanding matter.  A stay of the winding-up proceedings permanently would not be detrimental to the public interest.

12.  Consent to this application has been obtained from all shareholders.  The Official Receiver has no comment on the Heads of Terms and takes a neutral stance in this application.

13.  It seems to be appropriate that the winding-up proceedings of the Company should be stayed permanently.  I will grant the relief sought and make an order in terms of paragraphs 1 to 5 of the summons.