SECRETARY FOR JUSTICE, for and on behalf of the REGISTRAR OF COMPANIES v. CHINA CAPITAL STRATEGY LTD

HCCW 426/2021

[2024] HKCFI 542

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING‑UP) PROCEEDINGS NO 426 OF 2021

___________________

___________________

___________________

______________

D E C I S I O N

______________

1.  This is the application of Wang Sing (“the Applicant”) by summons dated 5 January 2024 in his capacity as a creditor of China Capital Strategy Limited (“the Company”) for

(A)  a permanent stay of the current winding up proceedings against the Company pursuant to section 209(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“the Ordinance”); and

(B)  the release of Tsui Mei Yuk Janice and Wong Sun Keung (“Mr Wong”) as the joint and several provisional liquidators of the Company (“PLs”).

2.  The Company was incorporated in Hong Kong on 7 June 2004.

3.  The Applicant was a director until 20 December 2021. He was and is still a creditor of the Company.

4.  The sole shareholder of the Company was and is Amerinvest International Forestry Company Limited (“AIFG”). In February 2013, the controlling interest of AIFG was sold to an existing shareholder. The Company unsuccessfully appealed against the refusal of the Registrar of Companies (“the Registrar”) to register certain documents reflecting the change of control and was ordered to pay the Registrar’s costs taxed and allowed at approximately $176,000 on 15 March 2019.

5.  The Secretary for Justice (“the Petitioner”) acting on behalf of the Registrar served a statutory demand on the Company in respect of those costs with accrued interest on 22 October 2021 in the sum of approximately $255,000 (“the Debt”). When the Company failed to meet the statutory demand, the Petitioner presented a winding up petition

6.  A winding up order was made on 19 January 2022 and the PLs were appointed.

7.  Only 2 proofs of debt were filed with the Official Receiver’s Office (“OR”) and the PLs.

8.  The PLs filed a “Report to Court and Application for the Stay of Winding Up” on 11 January 2024 stating, inter alia, that

(a)  the Applicant provided financial support to settle the liabilities of the Company as well as the costs and disbursements of the solicitors for the Petitioner;

(b)  the 2 claims had been settled in September 2022;

(c)  the costs and disbursements of the solicitors for the Petitioner was settled in October 2022;

(d)  arrangements have been made to settle the deposit paid to the OR;

(e)  no new proof of debt application was received after the publication of Notice of Creditors of Intention to Declare Dividends in December 2022;

(f)  the Company was no longer considered to be in debt, except as to the Applicant; and

(g)  the Company had been out of business for over 10 years, such that no further investigation was considered necessary.

9.  The Applicant who paid the 2 claims made against the Company became the only creditor in the sum of approximately $260,000.

10.  The PLs and the OR take a neutral stance on the summons and whose attendance at the hearing have been excused.

Legal principles

11.  A convenient statement of the general principles can be found in Re GW Electronics Co Limited [2020] HKCFI 2936 at §§11-12.

12.  §11 is derived from §§5-6 of the judgment of Kwan J (as she then was) in Re Outboard Marine Corp Asia Limited [2003] 1 HKLRD 585.

13.  §12 is derived from §2(5) of Re Luen Tat Watch Band Manufacturer Limited, HCCW 497/2009, 27 November 2017 where DHCJ To stated:

“[i]n considering the question of the solvency of the company, the Court may consider whether the undertakings given by the Applicant are sufficient for the purposes of showing solvency. It would take into account any arrangement which has been made to ensure that all the company’s debts are paid such that the company is for all practical purposes solvent. A stay may also be deferred until the company’s debts were actually paid off.”

14.  The factors relevant to the exercise of the Court’s discretion under section 209 (1) of the Ordinance are

(1)  whether the debts and expenses of the liquidation are paid;

(2)  whether the debts of the company are paid or satisfactorily provided for; and

(3)  whether the affairs of the company would require investigation in a winding up:

see Re Huaqing Oriental Mining (Holdings) Limited (In Liquidation) unrep., HCCW 930/2002, 26 June 2003 at §3.

15.  Further, the existence of genuine commercial reasons for a stay of the winding up would be taken into consideration: Re Shisei (PNG) Enterprises Co Ltd [2018] HKCFI 1535 at §5.

This application

16.  Mr Roger Phang, counsel for the Applicant, submitted that in the present case,

(1)  the debts of the Company have been paid or are satisfactorily provided for. The PLs consider the Company to be no longer in debt, except as to the Applicant who is willing to undertake not to enforce the debts for at least a year from the date of order of stay;

(2)  costs and expenses incurred by the PLs for the winding up have been paid or at least satisfactorily provided for. The Applicant has indicated his willingness to undertake to pay for costs in winding up proceedings, the liquidation, and the present application;

(3)  the PLs do not object to a permanent stay;

(4)  the costs and/or disbursements of the Petitioner and its solicitors have also been paid in full;

(5)  as the PLs’ view (expressed in the PLs’ Report) is that “no further investigation is necessary”, no issue of commercial morality or public interests which militates against the Court granting a permanent stay arises; and

(6)  the stay is sought for a genuine commercial reason.

17.  The evidence shows that there is a commercial reason for the present application. Following the failure to have the change of control documents filed in the Companies Registry, the controlling shareholder of AIFG stopped using the Company to conduct any business. Meanwhile, there have been disputes over the change of control and ownership of AIFG and the proper resolution of that dispute requires the Company to go back to a going concern.

Conclusion

18.  Having regard to the matters set out above, I am satisfied that this is a proper case to grant the relief sought.

19.  Accordingly, I make an order in terms of the draft order submitted to the court at the hearing.