RE DE RIGO ASIA LTD

HCMP 3449/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3449 OF 2003

____________

____________

_______________

J U D G M E N T

_______________

1. This is a petition by De Rigo Asia Limited ("the Company") seeking confirmation by the court of its proposed reduction of capital pursuant to section 59 of the Companies Ordinance, Cap. 32.

2. The background matters may be stated as follows.

3. The Company was incorporated in Hong Kong on 9 October 2000. It is a subsidiary of De Rigo Nederland B V, which is incorporated in the Netherlands. De Rigo S p A, which is incorporated in Italy, is the ultimate holding company. The present authorised capital of the Company is HK$4 million, divided into 4 million shares of HK$1.00 each, all of which are issued and paid up. De Rigo Nederland B V holds 3,999,999 of the shares, the remaining share is held by De Rigo S p A.

4. The Company was previously the legal and beneficial owner of 80% of the issued share capital of De Rigo (Hong Kong) Limited ("De Rigo HK"), a trader of sunglasses and optical frames. As a result of the re-organisation of the De Rigo group, and on 10 December 2002, the Company transferred its entire interest in De Rigo HK to De Rigo Nederland B V and received HK$4 million in consideration. Following the transfer, the Company has become less involved in the development of the group's commercial and distribution strategies in the Asia Pacific region and is now mainly responsible for providing quality control service and logistic assistance to the group. As such activities do not require a substantial amount of capital and can be sufficiently financed by the revenues to be generated from the ordinary course of business of the Company, the Company has a substantially reduced capital requirement.

5. Accordingly, on 24 April 2003, a written resolution was passed by all the members to approve the reduction of capital, pursuant to regulation 47 of Table A, which has been incorporated into the Articles of Association of the Company. It was resolved that the share capital be reduced from HK$4 million divided into 4 million ordinary shares at HK$1.00 each to HK$200,000.00 divided into 4 million ordinary shares of HK$0.05 each and that such reduction of capital be effected by returning paid up capital to the extent of HK$0.95 for each issued share of HK$1.00, such amount be transferred to the distributable reserves of the Company.

6. The proposed reduction is to cancel capital in excess of the needs of the Company and cannot in the opinion of the directors be usefully employed in its business. The distributable reserve thereby created in the amount of HK$3.8 million is proposed to be distributed to the members of the Company.

7. On 16 September 2003, directions were given to dispense with the settlement of a list of creditors under section 59(2) and for notice of the presentation of the petition and of the hearing of the petition to be advertised. The directions have been complied with. No creditors or shareholders have come forward to oppose the petition.

8. The principles on which a reduction of capital will be confirmed by the court are well established. The court will not confirm a reduction unless it is satisfied that: (1) all shareholders have been treated equitably; (2) the reduction proposals have been properly explained; (3) the creditors are safeguarded; and (4) the reduction is for a discernable purpose.

9. The first, second and fourth requirements have clearly been complied with.

10. As to the third requirement, the Company has produced the audited accounts for the period ended 31 December 2002. Its liabilities as at that date amounted to HK$246,637.00 and comprised the following:

(1) due to a fellow subsidiary - HK$36,870.00;

(2) accruals and other payables - HK$43,981.00; and

(3) tax payable - HK$165,786.00.

11. The liability due to a fellow subsidiary is owed to De Rigo HK. That liability has since increased and as at the date of the supporting affidavit on 17 July 2003, it amounted to HK$49,795.00. I am given to understand that that liability has remained unchanged as at present. De Rigo HK has provided a letter dated 28 May 2003 giving consent to the proposed reduction of capital and another letter dated 21 August 2003 giving its agreement that the debts owed by the Company to De Rigo HK be postponed to all other debts or claims against the Company which are outstanding as at the date on which the court shall confirm the reduction, which if such date was the commencement of the winding up of the Company would be admissible in proof against the Company.

12. The accruals and other payables have been settled in full.

13. As regards the tax payable to the Hong Kong Inland Revenue Department, the auditors of the Company have confirmed that the sum of HK$165,786.00 represents the Company's estimated tax liabilities for the tax year 2001/02 and that the Inland Revenue Department has not issued the Notice of Assessment for the tax year as at the time of the supporting affidavit. The Company has on 23 June 2003 set up a separate bank account and deposited into it HK$190,000.00, sufficient to meet the future tax liabilities as and when they fall due. The Company has resolved to use the amount in this account only to settle the tax payable.

14. I am satisfied the proposed reduction would pose no prejudice to any of the creditors.

15. I therefore confirm the proposed reduction of capital and make an order in terms of the draft submitted.