CHINA PUTIAN FOOD HOLDING LTD v. THE STOCK EXCHANGE OF HONG KONG LTD

HCAL 199/2025

[2025] HKCFI 2713

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 199 OF 2025

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REASONS FOR DECISION

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A.  Introduction

1.  By its Form 86 dated 15 January 2025, the Applicant (“Company”) sought leave to apply for judicial review so as to challenge the decision dated 13 December 2024 (“Review Decision”) made by the Listing Review Committee (“LRC”) of the Putative Respondent (“Exchange”). The Review Decision upheld the decision dated 18 October 2024 (“LC Decision”) made by the Listing Committee (“LC”) that the Company’s listing should be cancelled under Rule 6.01A of the Listing Rules.

2.  I fixed a rolled-up hearing for 25 March 2025. At that hearing, the Company was represented by Mr Byron Chiu of Counsel, and the Exchange was represented by Mr Victor Dawes SC leading Mr Joshua Chan of Counsel.

3.  At the end of the hearing, I dismissed the application for leave to apply for judicial review, with costs to the Exchange, and for reasons to be handed down later.

4.  These are my Reasons for Decision.

B.  Background

5.  The Company was incorporated as an exempted company with limited liability in the Cayman Islands in May 2011, and was first listed on the Main Board of the Exchange on 13 July 2012.

6.  The principal activities of the subsidiaries of the Company (together with the Company, “Group”) were hog farming, hog slaughtering, sales of pork, sales of frozen pork and sales of commodity hogs. The Company’s business deteriorated and encountered financial difficulties for a period of time. On 17 November 2022, the Company engaged a valuer to evaluate the expected credit loss on long outstanding accounts receivables and possible substantial impairment loss of the unit of the Company in Hebei, PRC.

7.  It is also relevant to the Company’s position in these proceedings that the Group shifted its focus in FY 2022 from its own hog farming operations to external procurement of hogs and hog slaughtering services, and shifted its emphasis to wholesale business (as opposed to retail business). This substantially reduced the Group’s operational costs and maintained appropriate profit margins. The Company also stressed that this strategic repositioning was not any fundamental change in business model, but involved adjustments in the upstream as well as downstream of the business with which the Group had always been involved. References to changing business must, the Company asserted, be viewed in this light.

8.  Trading in the Company’s shares was suspended on 3 April 2023, by reason of delay in the publication of its annual results for the year ended 31 December 2022 (“FY 2022 Results”). This was the result of the Company’s auditors requiring additional time to complete audit work relating to (1) the expected credit loss issue, (2) the possible substantial impairment loss on non-current assets of the Company, and (3) an assessment on the Company’s going concern.

9.  Thereafter, the Listing Division (“LD”) imposed three resumption conditions (“Resumption Guidance”), namely:

(1)  RG1: publish all outstanding financial results and address any audit modifications;

(2)  RG2: demonstrate compliance with Rule 13.24 of the Listing Rules;

(3)  RG3: announce all material information for the Company’s shareholders and investors to appraise its position.

10.  By virtue of Rule 6.01A of the Listing Rules, the Exchange was empowered to cancel the Company’s listing if it failed to resume trading by the end of the 18-month remedial period on 2 October 2024.

11.  It is common ground that, in the remedial period, the Company attempted to take steps to improve its financial position. The Company has emphasised that it progressed on a “best-effort basis towards achieving compliance and continuing to comply with all conditions of the Resumption Guidance”. The steps included attempts to restructure its debts.

12.  In October 2016, the Company had issued a convertible bond (“Bond”) and a non-convertible note (“Note”) to a wholly-owned subsidiary (“Vandi”) of CCB International (Holdings) Ltd (“CCB”). The initial maturity date of the Bond and Note was 15 October 2018, though this was subsequently extended.

13.  As at 31 December 2022, the Company also had bank borrowings in the amount of approximately RMB115.4 million in default (“Bank Debt”).

14.  On 18 April 2023, the Company received a statutory demand from Vandi for the debt of HK$681 million arising from the Bond and Note.

15.  On 28 April 2023, the Company announced that it, Vandi and a potential new investor were actively engaged in discussions to negotiate a possible financing and debt restructuring plan (“Debt Restructuring”) for the Group.

16.  On 14 December 2023, the Group entered into a strategic cooperation agreement (“Cooperation Agreement”) with Beijing Secondary Meat Group Ltd (“Beijing Meat”), under which it was agreed, amongst other things, that (1) Beijing Meat would appoint the Group as its slaughterhouse to process Beijing Meat’s hogs, and (2) the parties would set up a joint venture with a combined capital injection of RMB50 million.

17.  On 5 September 2024, Vandi and the beneficial owner of the Bond and Note entered into a conditional sale and purchase agreement (“First SPA”) for the sale of the Bond and Note to a Mr Leong Lap Kun. The First SPA provided that the sale was conditional upon, amongst other things, (1) the Company’s shares having resumed trading, and (2) Mr Leong applying for and obtaining a waiver from the SFC in relation to any mandatory general offer obligation under the Takeovers Code.

18.  On 9 September 2024, the Company and Fujian Puyan Cloud Chain Industrial Co Ltd (“FPCC”) entered into a non-binding strategic cooperation framework agreement (“Framework Agreement”), by which it was agreed, amongst other things, that (1) after resumption of trading, FPCC would invest RMB60-75 million into the Group to assist with the implementation of the Debt Restructuring, and (2) FPCC would provide financing credit of approximately RMB32 million for setting fees from suppliers.

19.  On 2 October 2024, being the last day of the remedial period, the Company reported to the LD its status of compliance with the Resumption Guidance, and requested an extension of the remedial period to 31 December 2024 (“Extension Request”) given what it said was the very real prospect of compliance by that extended deadline (if granted).

20.  On 14 October 2024, the LD lodged a report with the LC and served it on the Company.

21.  On 18 October 2024, the LC decided to reject the Extension Request and to cancel the Company’s listing under Rule 6.01A, i.e. the LC Decision. The LC’s reasoning was that:

(1)  For RG1, the FY 2022 Results and the subsequent financial results remained outstanding.

(2)  For RG2, due to the outstanding financial results, there was no proper basis to assess the Applicant’s business activities, operation status and financial performance, and due to the high level of indebtedness there was a concern as to the Company’s cash flow position.

(3)  For RG3, as the Company had not complied with the other conditions of the Resumption Guidance, RG3 remained outstanding.

(4)  As the Company had failed to fulfil any condition of the Resumption Guidance, with uncertainties as to whether it could achieve compliance within a short period of time or at all, it is case did not fall within the ambit of “exceptional circumstances” under §§22 or 23 of the Exchange’s Guidance Letter HKEX-GL95-18.

22.  On 24 October 2024, Mr Leong entered into a conditional sale and purchase agreement with Mr Zhang Zhen to sell the purchase assets under the First SPA to Mr Zhang (“Second SPA”).

23.  On 28 October 2024, the Company applied for a review of the LC Decision by the LRC.

24.  On 30 October 2024, the LRC gave directions, including that the review hearing would take place at 10:30am on 10 December 2024, and for the provision of written submissions by the parties. The hearing date notified was expressly noted to be a tentative date, where any change would normally be in the same date range, within a few days before or after the tentative date set. The parties were also reminded that the review process is intended to be informal and to be conducted primarily on the papers.

25.  On 4 November 2024, the LRC informed the parties that the hearing date was changed to 10:30am on 4 December 2024 (six days earlier than the previous date notified).

26.  On 6 November 2024, the Company filed its written submissions and exhibits. On 13 November 2024, the LD filed its written submissions in response. On 20 November 2024, the Company filed its written reply submissions and exhibits.

27.  On 20 November 2024, Putian State-Owned Asset Operation Group Co Ltd issued a cooperation progress memorandum stating, amongst other things, that a working team had been formed to deal with the indebtedness of a wholly-owned subsidiary of the Company, and expressed its intention to purchase that subsidiary’s debt (“Tianyi Debt”) at RMB50 million with plans of converting the debt into shares of the Company.

28.  On 22 November 2024, the Company announced its FY 2022 Results. The auditor’s report contained a disclaimer of opinion, on the basis of a scope imitation relating to the assessment on appropriateness of the going concern basis of accounting. The auditors noted that the evidence available to them was limited and in particular the bankers had not confirmed their intentions with regard to the extension of the debt. The auditors saw no alternative procedures to perform to satisfy themselves that the Group would be able to implement its plans and measures to extend the debt as assumed in the cash flow forecast. It was specifically noted that:

Should the Group fail to achieve the above-mentioned plans and measures, it might not be able to continue to operate as a going concern, and adjustments would have to be made to write down the carrying values of the Group’s assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities. The effects of these adjustments have not been reflected in the consolidated financial statements.

29.  On 2 December 2024, one of the banking creditors of the Company issued a letter supporting the Company’s work towards resumption of trading and resolution of its indebtedness, including the Bank Debt.

30.  On 3 December 2024, at around 10:22pm, the Applicant announced its HY 2023 Results, HY 2024 Results, and FY 2023 Results. The FY 2023 Results had a similar disclaimer of opinion as in the FY 2022 results. However, it is fair to say that the FY 2023 results identified a stable revenue and a significant increase in gross profit.

31.  On the other hand, the HY 2024 results made clear that the negotiation with bankers to extend the Debt and to seek potential buyers to purchase the Debt as new loan restructuring was continuing even as at the date those financial statements were produced. As it was put:

Based on the latest development in respect of the possible financing and debt restructuring plan … the Company, the Potential New Investor and the Creditor are still engaging in active discussion and negotiation.

32.  At the review hearing on 4 December 2024, the Company’s Chairman and Executive Director (“Mr Cai”) was invited to and made oral submissions. Thereafter, the LD made submissions including by circulating copies of briefing notes (“Briefing Notes”), said to comprise the LD’s analysis of the issues and where the LD stood on the issues in light of the very recently published Results. Following the LD’s oral submissions, members of the LRC asked questions of the parties, and thereafter the parties were invited to and did make brief final oral submissions.

33.  It can be noted that the review hearing involved simultaneous English/Mandarin interpretation of the submissions and questions. The hearing was also attended by representatives of the Company’s then legal adviser and auditor, who were apparently conversant in both English and Mandarin.

34.  In the course of questions and answers, the Company acknowledged that the extension which it had previously sought up to 31 December 2024 was unrealistic, and asked for a further extension until 31 March 2025.

35.  The Review Decision was given on 13 December 2024.

C.  The Review Decision

36.  In the introductory parts of the Review Decision the LRC set out the relevant background, including the Resumption Guidance and the various activities of the Company in the remedial period, including matters relating to the Bond and Note, the Cooperation Agreement, the Debt Restructuring and First SPA, the Framework Agreement, and the Second SPA. It then set out the applicable Listing Rules and Guidance and the delisting framework.

37.  After identifying the LC Decision, the LRC recorded (in summary) the submissions made to it by the Company and the LD, before setting out its own views.

38.  Those views are to be found in the Review Decision at §§53-66, as follows:

Listing Review Committee’s Views

53. The Listing Review Committee noted that trading in the Company’s shares had not resumed by the resumption deadline on 2 October 2024 or, indeed, by the time of the Hearing, over two months after the expiry of the remedial period. The Company’s listing could therefore be cancelled under Rule 6.01A (1).

54. The Listing Review Committee noted that the Company had initially suggested that it would be able to fulfill all conditions of the Resumption Guidance by 31 December 2024 but had waited until the Hearing to inform the Listing Review Committee that more time was required until 31 March 2025, i.e. an extension of a total of six months, to complete all outstanding steps. The Listing Review Committee therefore had to consider what the Company’s status of compliance with the Resumption Guidance was as at the time of the Hearing, and, whether the Company’s circumstances allowed for an extension of the remedial period under the relevant paragraphs of GL95-18 or otherwise.

RG1 – outstanding financial results and audit modifications

55. The Listing Review Committee noted that the outstanding financial results had been published and the Listing Division no longer took an issue with the Company’s compliance with RG1. While noting that the outstanding results were only published shortly before the Hearing and well after the expiry of the remedial period, the Listing Review Committee considered that the Company had fulfilled RG1.

RG2 – Rule 13.24 compliance

56. The Listing Review Committee noted at the time of the Hearing and based on the financial results published shortly before the Hearing, that the Company had been able to achieve a stable revenue of over RMB400 million for the most recent financial years. At the same time, the Listing Review Committee noted that the Company was heavily indebted and that steps to resolve the various debts of the Company had not yet been completed as the Company continued to incur heavy losses and, as of 30 June 2024, had net liabilities of RMB763 million.

57. In terms of the Company’s attempts to resolve its indebtedness and improve its cashflow, the Listing Review Committee noted the following:

(a) As for the Bond Debt, the relevant arrangements to implement the Debt Assignment, such as the First and Second SPA, had not been completed and completion remained uncertain, in particular as the relevant arrangements were subject to conditions which had not yet occurred, including relevant regulatory approvals and the resumption of trading. In addition, the Company had flagged that it continued to negotiate with Mr. Zhang about further arrangements such as issuing Company shares in exchange for the debt – as these arrangements remained very preliminary and required many additional steps including potentially regulatory and shareholder approvals, it remained unclear when these could be completed and, if any of these steps failed or were delayed, whether Mr. Zhang would still be willing to refrain from enforcing the debt as per his letter dated 5 November 2024.

(b) In terms of the Bank Debt, the Listing Review Committee took note of the BOC Letter submitted at the Hearing but considered that in any event no agreement with the relevant bank creditors had been reached and it remained unclear whether and when the Bank Debt could be resolved.

(c) Similarly, the Company continued to negotiate as to the Tianyi Debt and it was unclear when the same could be resolved.

58. The Listing Review Committee took the view that the Company had many substantive steps to complete in order to resolve the relevant debts and, based on existing conditions before such steps could be completed, it remained uncertain whether and if so when the Company would be able to discharge the debts. Based on the Company’s minimal cash reserves of RMB4 million as of 30 June 2024, the Listing Review Committee was concerned that the Company did not have assets of sufficient value to support its operations.

59. In terms of the Company’s operations, the Listing Review Committee noted that the Company had acknowledged that its previous business model focused on hog farming may no longer be viable due to continuing price pressure and resulting low profit margins. While the Company was planning to shift its business model, the Listing Review Committee was concerned that the Company had not presented clear plans as to its future operations and to what an extent it had already started to implement the different business model in its ongoing operations. Notwithstanding the Company’s stable revenue, the Listing Review Committee shared the Listing Division’s concerns that the Company had not been able to demonstrate a sufficient track record for its planned change in business model and insufficient details to conclude that following the relevant restructuring steps and the planned resolution of the Company’s ongoing indebtedness, the Company’s operations would be viable, sustainable and of substance, and enable the Company to return to profitability.

60. Based on the outstanding steps at the time of the Hearing, the Listing Review Committee took the view that the Company had not been able to demonstrate compliance with Rule 13.24 and RG2. The Listing Review Committee further considered that the remaining steps for the Company to discharge its indebtedness and implement the change in business model were substantial and it remained uncertain if these steps could be completed within the requested extension of the remedial period or at all.

RG3 – keep the market apprised of all material information

61. The Listing Review Committee noted that compliance with RG3 was to be assessed after the Company had met all the other conditions of the Resumption Guidance. AS RG2 remained unfulfilled, the Listing Review Committee considered the Company had failed to comply with RG3.

Exceptional circumstances / Time extension

62. In considering whether the Company should be entitled to an extension of the remedial period, the Listing Review Committee noted that at the Hearing, the Company had further extended its extension request for six months, until 31 March 2025. The Listing Review Committee noted this extension was not short as envisaged in the Guidance Letter GL95-18. The Listing Review Committee further noted that the Company had mainly relied on (i) its completion of RG1; and (ii) the difficulties and delay in completing the commercial negotiations for the purpose of discharging its debts, to argue there were “exceptional circumstances” and that an extension of the remedial period should be granted.

63. In assessing the Company’s application for an extension, the Listing Review Committee noted that paragraph 22 of GL95-18 required that, for the existence of exceptional circumstance, an issuer had to demonstrate it had substantially implemented the steps that would lead to a resumption of trading and only required a short extension to finalise matters due to (procedural) factors out of the issuer’s control. As set out above, the Listing Review Committee did not consider that the Company had demonstrated that it had substantially implemented the steps required to meet the conditions of the Resumption Guidance as only RG1 had been complied with and many substantive steps remained outstanding, and it was unclear whether or when they could be completed. For that purpose, paragraph 22 of GL95-18 was not applicable in the Company’s situation. For the avoidance of doubt, the Listing Review Committee did also not agree with the Company that the commercial nature of the Debt Restructuring or difficulties in concluding that the relevant negotiations were factors beyond the Company’s control inhibiting its ability to timely take remedial steps. The Listing Review Committee considered that GL95-18 made it clear that the onus was on the Company to ensure relevant resumption plans and steps were completed in a timely manner – this would include anticipating time required for negotiations or protracted approval processes at creditors, potential business partners or investors.

64. The Listing Review Committee noted that when considering an extension of the remedial period, it was not limited to the description in paragraph 22 of GL95-18, but could also consider the assessment set out in paragraph 23 of GL95-18. The Listing Review Committee considered, however, that this also did no apply to the Company, as for the reasons set out above the Company had failed to demonstrate the existence of any steps that were out of the Company’s control. Further, the Listing Review Committee did not consider the Company had established with sufficient certainty that it could achieve compliance with the Resumption Guidance even within the further time extension sought, given the considerable uncertainties and potentials for delay. The Listing Review Committee noted that pursuant to GL95-18, in the rare cases where an extension of the remedial period was granted, the Exchange would not normally extend the remedial period for a second time. The Listing Review Committee was also concerned that the Company may have failed to act promptly throughout the remedial period, noting that (a) the various agreements relating to the Debt Restructuring were only entered into at the end of, or indeed, after the remedial period; and (b) even for the financial results which the Company ultimately managed to publish, the final outstanding results had only been published the night before the Hearing, i.e. well after the expiry of the remedial period.

65. In summary, the Listing Review Committee took the view that the Company had, as at the time of the Hearing, neither complied with all the conditions of the Resumption Guidance nor identified any grounds based on which the remedial period could be extended pursuant to paragraphs 22 and 23 of GL95-18 or otherwise.

Decision

66. In light of the matters set out above, the Listing Review Committee therefore decided to uphold the Listing Committee’s decision to cancel the Company’s listing pursuant to Rules 6.01A(1).

39.  As can be seen, the LRC considered that the Company had fulfilled RG1. However it found that the Company had not fulfilled RG2 and RG3, because (1) the Company was heavily indebted and it remained uncertain whether and if so when the Company would be able to discharge its debts, (2) the Company had not been able to demonstrate a sufficient track record for its planned change in business model, and there were insufficient details to conclude that the Company’s operations would be viable, sustainable and of substance after the Debt Restructuring had been completed, and (3) RG3 could only be fulfilled after RG2 was fulfilled.

40.  The LRC considered, but refused to grant, an extension of the remedial period because of the numerous and substantial steps which remained outstanding, and the resulting uncertainty as to whether and when the Company could resume trading.

D.  Intended Grounds of Review

41.  The Form 86 identified four intended grounds of review:

(1)  Ground 1: Procedural Unfairness, said to arise from:

(a)  the unilateral change of the hearing date from 10 December 2024 to 4 December 2024, without consultation and reasons;

(b)  not affording the Company any reasonable opportunity to respond to the LD’s Briefing Notes;

(c)  prevalent translation issues during the review hearing significantly hampering effective representations to be made by the Company and the Company’s understanding of questions posed;

(d)  translation issues exacerbated by the absence of a transcript of the Chinese interpretation, leading to the situation that there is no meaningful way of identifying whether proper translation was provided;

(e)  the Company not being given the opportunity to submit supporting documents referred to in the review hearing, despite this being material to the LRC’s consideration of the Company’s compliance with RG2;

(f)  the LRC’s rejection of a request for a second review hearing;

(g)  all of which hampered the proper determination of whether RG2 had been satisfied.

(2)  Ground 2: The LRC failed to properly exercise its discretion in coming to the Review Decision and/or failed to ask the correct question in relation to whether the Company is in compliance with Rule 13.24(1). There was a focus on the Company’s solvency status, instead of a proper examination of the viability and sustainability of the Company’s business through the prism of whether continued listing was warranted.

(3)  Ground 3: Error of Law in the LRC considering and in its consideration of the viability of the Company’s future operations. The LRC should have been slow to substitute its own judgment for managerial decisions regarding commercial justification and future operations forecasts, and failed to take proper account of the stance of the Company’s creditors.

(4)  Ground 4: Unreasonableness in the public law sense, for the reasons advanced under Grounds 1, 2 and 3.

42.  These Grounds are all set out in detail and at some length in the Form 86 – though it is not necessary to set out all of that detail, or to adopt a similar length, for the purposes of my reasoning. Indeed, the written skeleton submissions and the oral submissions put forward on behalf of the Company seem to focus on the LRC’s finding that the Company had failed to comply with Rule 13.24, which is said to be an unsound finding in circumstances where the financial performance of the Company’s business had improved.

43.  In his submissions, Mr Chiu stressed the following matters of context (in summary):

(1)  Individually and collectively, the four intended grounds of review highlight the irregularity and unreasonableness of the Review Decision in the particular circumstances of the case, where at the time of the review hearing before the LRC on 3 December 2024, the Applicant had effectively complied with all the Resumption Guidance.

(2)  By that date, RG1 had been fulfilled and RG3 was largely dependent on whether the Company had fulfilled RG2. Therefore the crux is the LRC’s consideration of RG2.

(3)  In that regard, the materials placed before the LRC overwhelmingly demonstrated:

(a)  a significant improvement in financial performance (including substantial and stable revenue of around RMB500 million and RMB439 million for FY 2022 and FY 2023, a 16.32% increase in gross profit from FY 2022 to FY 2023);

(b)  a “concrete and near-fruition” restructuring arrangement which would have eliminated more than 90% of the Company’s net current liabilities;

(c)  those matters were coupled with a series of strategic business repositioning, commencement of operations, new customer contracts, strong governmental support and continuous creditor support;

(d)  together, they would have gradually but vastly transformed the Company’s asset/liability position into a net asset position as well as improved its cash flow position.

(4)  Creditors, who are the best judge of what is in their own commercial interests, have seen fit not to press ahead with any winding up petition notwithstanding concerns over the Company’s financial position. Their inaction is the most remarkable illustration of the confidence in the Company’s demonstrably significant improvements in its affairs and untiring efforts in restructuring its liabilities.

(5)  The events following the review hearing and Review decision are at least retrospective confirmations of (and lend credence to) what the Company had submitted to the LRC and laid out in its financial results published shortly before the review hearing.

(6)  The LRC placed undue emphasis on the financial solvency of the Company in determining whether the Company has a viable and sustainable business, in a way which is flawed as identified by the four intended grounds of review.

44.  Further, Mr Chiu submitted that, where the CCB Debt issue was the principal cause that led to the auditor’s inability to assess the financial statements on a going concern basis, but where the proposed restructuring would have eliminated over 90% of the Company’s net current liabilities/net liabilities, there ought not to have been any suspension of trading, and by extension there ought not be any delisting. It was also inappropriate to discount or cast doubt on the Company’s efforts to restructure its liabilities and strategically reposition its business approach by referring to uncertainties.

45.  Hence, the Company is not just another disgruntled judicial review applicant who is financially unsound or poses a threat to the investing public, but instead a market leader which had undergone some financial turmoil in past years, but regained momentum in improving its financial position and business operations in a significant manner.

46.  I can address each of the intended grounds of review in turn.

E.  Ground 1

47.  The thrust of Mr Chiu’s submissions was that the complaints of procedural unfairness individually, but more importantly collectively, hampered the Company’s submissions on the crucial assessment of its financial position, and so in turn impacted the LRC’s lack of proper consideration of the relevant materials in determining compliance with Rule 13.24.

48.  With respect, this intended ground is not arguable. That is the position whether the individual complaints are viewed individually, or collectively.

49.  As to the complaint about the change of hearing date, I do not think calling it a “unilateral change” is helpful to the analysis. This is so not least because Mr Chiu accepts that the LRC was entitled to make a change (as it had specifically identified the first date set as tentative and potentially subject to change). Further, the new date was set only three working days after the initial date had been set, and the Company was given a full month’s notice of the new hearing date.

50.  Mr Chiu submitted that the applicant was prejudiced in having significantly less time to prepare for the review hearing. I do not accept that, because it must be assumed that preparation had begun even upon the seeking of the review, and the one-month period from the date of notice of the re-fixed hearing date was a substantial period within which to prepare for the review hearing.

51.  Mr Chiu submitted that shortening of time was also coupled with the “unfortunate timing” that the Company’s financial results were only published the night before the review hearing. This seems to me to exhibit a misunderstanding of the process. Compliance with the Resumption Guidance was supposed to have been effected before the end of the 18-month remedial period (i.e., 2 October 2024) – not by the eve of, or even a week before, the review hearing. I accept Mr Dawes’ submission that the Company was supposed to use the one-month period to prepare its submissions, not to engage in substantive work required for resumption of trading, which ought to have been done well in advance of that. I also accept the submission that the complaint appears to be an afterthought, where the Company – if it felt that it did not have sufficient preparation time – could have made the complaint at the review hearing and could have asked the LRC for an adjournment. It did neither.

52.  As to the complaint about not being afforded a reasonable opportunity to respond to the LD’s Briefing Notes (which Mr Chiu said were in substance supplemental written submissions), I agree with Mr Dawes that it lies ill in the Company’s mouth to raise that complaint when the Briefing Notes were necessitated by the Company’s belated publication of its outstanding financial results just hours before the review hearing.

53.  I also accept that even had the Briefing Notes not been produced, the LD would plainly have been able to make oral submissions to address the belatedly published financial results. The Briefing Notes merely provided an aide memoir of those points, for the benefit of all participants. Indeed, the Company had the opportunity to respond to those points in its oral closing submissions and/or during the question-and-answer session. Again, the Company did not suggest that there was anything in the Briefing Notes by way of new facts or evidential materials on which the Company should be given an adjournment for the purpose of addressing them.

54.  As to the suggested translation issues, and lack of transcript of Chinese interpretation provided at the review hearing, Mr Chiu referred to two examples. Neither of them are good examples of any procedural unfairness. The first example of purported failure to mention supporting contracts did not give rise to any miscommunication because the LRC heard and understood the Company’s response in Mandarin, and it was also aware of the contracts because they had been mentioned in oral opening submissions. The second example of a suggested misinterpretation as to when outstanding financial results would be published makes little sense where everyone at the review hearing was obviously aware that the Company had published the outstanding financial results late on the previous evening. It also seems to me that there were various safeguards available to the Company to guard against potential (if not significant) risks of errors in simultaneous interpretation. The Exchange had previously expressly told the Company that it was free to engage and bring its own interpreter if it so desired. Instead, the Company attended with legal representatives and auditors who (between them) presumably understood both English and Mandarin and could have helped correct any alleged misinterpretation or misunderstanding.

55.  As to the complaint about the Company not being afforded an opportunity to submit some of the supporting documents salient to the LRC’s determination of the issues, the Company had been given the full opportunity to submit whatever documentary evidence it thought appropriate together with its submissions in the run-up to the review hearing. As it happens, the Company had submitted some of the relevant documents in advance, which were considered by the LRC. I also agree with Mr Dawes’ submission that there could not have been any resulting unfairness to the Company, where the remaining category of documents which it is said might have been provided were not relevant to the issues in dispute, and/or were not on the determinative path taken by the LRC in making the Review Decision.

56.  As to the complaint about failure to reconvene a second review hearing, I do not think this created any procedural unfairness. The Listing Rules provide that the hearing before the LRC is a de novo hearing and it was conducted on that basis. If there was any public law error arising, then an application for leave to apply for judicial review can be made. In this case, the Company says there were such public law errors, and has made such an application.

57.  Ground 1 is not reasonably arguable with any realistic prospect of success.

F.  Ground 2

58.  As Mr Chiu submitted, Ground 2 concerns the LRC’s assessment of the Company’s fulfilment of RG2 and compliance with Rule 13.24. He submitted that the LRC failed properly to exercise its discretion in coming to the Review Decision, and/or failed to ask the correct question in the consideration of whether the Company was in compliance with rule 13.24. That question requires examination of the viability and sustainability of the Company’s business through the prism of whether continued listing is warranted, not through the lens of solvency. Mr Chiu referred to China Trends Holdings Ltd v Stock Exchange [2021] 3 HKLRD 554 at §§23-24.

59.  Hence, Mr Chiu submitted, the fact that there may be uncertainties as to whether the Company’s business/restructuring plan might be followed through, or whether the Company would be able to discharge its debts, do not address the salient question. Overemphasis of uncertainties, as occurred in the Review Decision, is inappropriate where even if those uncertainties raise auditors’ doubts as to the going concern basis, that would not normally have resulted in the suspension of trading.

60.  So, Mr Chiu submitted the LRC ought (1) to have had proper regard to the financial results published by the Company, (2) to have properly appreciated the change in business strategy by the Company, and its significance. The significant improvement in financial performance since the strategic change, as well as the creditors’ belief in the Company’s plans and business direction, are the best indicators of viability and sustainability. The submission was that to look for a ‘track record’ is irrational because by definition a shift in business strategy means that the Company is operating on a different ‘track’.

61.  There was also a failure, so submitted Mr Chiu, properly to consider the significance and degree of certainty of the CCB Debt Restructuring, which would eliminate more than 90% of the Company’s net current liabilities/net liabilities. Suggesting that there were still many steps until that would materialise was to ignore the ongoing developments with Mr Zhang in agreeing to acquire the CCB Debt and convert it into equity.

62.  In partial support for the submission, Mr Chiu also referred to subsequent business updates, post-dating the review hearing. Indeed, in his affirmation evidence, Mr Cai had also sought to place significant reliance on events well into March 2025. With respect, I do not think these matters are capable of being relevant to the consideration conducted by the LRC at the review hearing in December 2024 (I do not think they can be deployed to give after the event support).

63.  The missing piece of the CCB Debt Restructuring was said by Mr Chiu to be merely the approval (conditional or otherwise) of the Company’s trading resumption. Once that was put in place, the CCB Debt Restructuring would come to fruition. He said it was in that context that GL95-18 §36 comes into play, which provides that:

Where an issuer’s corporate actions include equity fundraising is, the Exchange would consider granting the required listing approval only if the issuer satisfies the Exchange that upon completion of the equity fundraising is, the issuer will then have fulfilled all the resumption conditions/guidance, re-complied with the Listing Rules, and be eligible for trading resumption.

64.  So, Mr Chiu submitted, by parity of reasoning, upon completion of the CCB Debt Restructuring, the Company would have formally complied with Rule 13.24. Further, he submitted, the LRC ought to have taken into account the strong governmental support and creditor support.

65.  However, I accept the submission from Mr Dawes that it is the Company which has framed the wrong question by a misreading of the China Trends case. The two paragraphs relied upon actually support the proposition that solvency is not sufficient to comply with Rule 13.24 if the Company does not also have (1) a viable and sustainable business and (2) sufficient assets to warrant continued listing. By referring to these matters, it can be seen – as has been held previously – that compliance with Rule 13.24 is to be examined holistically, with reference to both quantitative and qualitative factors: see the China Trends case at §§48-55.

66.  Hence, solvency is a necessary but not sufficient condition, and it is incorrect to contend that proof of continued solvency may not be necessary. All factors will be taken into the assessment. I also accept the submission that reference to the notes to a different Listing Rules 13.50A is misdirected, and does not support any submission for this case that proof of continued solvency is unnecessary or irrelevant to the matter of delisting.

67.  I also do not think there is an arguable public law error in the LRC taking into account the degree of certainty or uncertainty of the proposed Debt Restructuring. As a matter of fact, it was uncertain – not least where even as at the date of the review hearing various aspects of it were subject to negotiation and agreement, and aspects agreed were still subject to conditions including regulatory approval. It also seems to me to be obvious that these various matters would be properly viewed by the LRC against the overall context, including other aspects of debt and the overall financial position.

68.  I do not think there was any arguable error arising from the LRC’s review of the financial results produced just hours before the review hearing. If there was an insufficiency of time for proper review of those results, that was a problem caused by the Company itself. Nevertheless, it did not ask for an adjournment. Indeed, the flavour is that the Company pulled out all the stops to obtain the financial statements with just a few hours to spare before the review hearing, so that at least it could say that it had complied with one aspect of the Resumption Guidelines. In those circumstances, the criticism that the LRC merely “recorded” content of the submissions, rather than properly considering them, is misplaced. In any event, I see no substance to a submission that recording matters in a decision means that they were not taken into consideration. In reality, much of the intended Ground 2 is really a merits challenge.

69.  Mr Chiu submitted that even if there remained a degree of uncertainty, it was not one which on balance would render the Company non-compliant with Rule 13.24. However, balance is a matter for the LRC, not for the Court, unless irrational. To re-comply with Rule 13.24, an issuer must demonstrate to the Exchange’s satisfaction that it has a business that has substance and is viable and sustainable in the longer term. It is clear that part of the purpose for publishing periodic financial results is for the Exchange to be able to monitor the issuer’s business activities, operation status and financial performance to assess whether the issuer has sufficient operations and assets under Rule 13.24 to warrant its continued listing. Demonstration of compliance with Rule 13.24 must occur before trading can resume, and subject only to the possibility of an extension in limited circumstances, the suspended issuer must comply with the Rules before the remedial period ends if it is to avoid delisting.

70.  Lastly, there is little assistance to be gained from looking at previous decisions of the LRC relating to different companies at different times in different circumstances. It may be that in another case the LRC has afforded an extension of time, when it thinks that a degree of uncertainty may be clarified after that time. Obviously, uncertainty of itself is not determinative. But previous cases all identified that decisions of the LRC do not represent binding precedents, and do not constrain the discretion exercised by the Exchange or other committees, including without limitation the LRC in respect of other matters.

71.  In short, it seems to me that on the materials the LRC was plainly entitled to have formed the view it did and to have reached the conclusions it did.

72.  Ground 2 is not reasonably arguable with any realistic prospect of success.

G.  Ground 3

73.  The alleged error of law is that the LRC, when considering the viability of the Company’s future operations, should have been slow to substitute its own judgment for managerial decisions regarding commercial justification and future operations forecasts, and also failed to take proper account of the stance of the Company’s creditors. Mr Chiu relied on authority that the Court should give due weight to managerial assessment when determining whether directors have breached their duties of reasonable care and skill in exercising their directors’ powers.

74.  However, I accept Mr Dawes’ submission that the principle has little or no application to the determination by the LRC as to whether the Company’s business operations are viable and sustainable within the meaning of Rule 13.24. Of course, the LRC can take into account the views of the Company’s management, but it need not place any particular weight on them or give deference to them. The assessment required is for the LRC to make, using the skills and expertise available to it in the composition of its members in any given case.

75.  Ground 3 is not reasonably arguable with any realistic prospect of success.

H.  Ground 4

76.  This Ground was not separately pressed with any vigour by Mr Chiu at the oral hearing. Essentially, Ground 4 is based upon the matters set out in Grounds 1, 2 and 3. As those grounds have no reasonable arguability, any ground based upon them must also fall aside.

77.  The rest of the argument on Ground 4 really amounts to a merits challenge. Part of the criticism is that the LRC gave undue weight to particular considerations, or approached the Listing Rules in a way which was unreasonable in the public law sense.

78.  I do not think this is reasonably arguable. The earlier parts of the Review Decision show that the LRC had well in mind the Company’s position, including as to its efforts to have achieved compliance with the conditions under the Resumption Guidance. The weight to be given to the particular aspects was a matter for the LRC, and no reasonable irrationality argument arises. It was also a matter within the discretion of the LRC to decline or refuse to grant an extension of time. The reasons given by it for declining to grant the extension are perfectly rational and reasonable (in the public law sense).

79.  Ground 4 is also not reasonably arguable with any realistic prospect of success.

I.  Conclusion

80.  It was for the above reasons that I dismissed the Company’s application for leave to apply for judicial review, with costs to the Exchange.