Yidong (HK) Ltd v. Chan King Man and Another

HCCW 425/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 425 OF 2012

_________________

_________________

_________________

________________________

D E C I S I O N

________________________

1.I have before me an application made by Yidong (HK) Limited (“Yidong”) pursuant to section 209(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 to stay the winding up of the Company. The Company was wound up on the ground of insolvency on 23 January 2013. The present application is straightforward. The Company has two shareholders: Super Deluxe Investments Limited (“Super Deluxe”), which holds 70% of its issued capital, and Chan King Man, who holds the remaining 30%. Super Deluxe was owned by Yiu Chun Pong. Mr Yiu has sold his shares in Super Deluxe to Yidong. Yidong wishes to continue the Company’s business which was conducted through a subsidiary in the Mainland, which is synergistic with its own business. Mr Chan agrees. Yidong has already paid all the Company’s creditors and taken a novation of most of the debts, which gives it locus to make the present application.

2.Section 209(1) provides:

“The court may at any time after an order for winding up, on the application either of the liquidator, or the Official Receiver, or any creditor or contributory, and on proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the court thinks fit.”

3.The principles and criteria by reference to which the court determines applications to stay winding‑up proceedings under section 209 (1) are well established and explained in Kwan J’s (as she then was) decision in Re Outboard Marine Corp Asia Ltd[1]. Briefly they are as follows:

(1)    The power to grant a stay of winding up proceedings is discretionary.

(2)   The burden is on the applicant to make out a sufficient case that carries conviction.  Before granting a stay, section 209 (1) requires “proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed ”.

(3)    Whether there are sufficient assets to pay all the creditors of the company and the expenses of the liquidation. The court will also have regard to the interests of shareholders.

(4)    The court will also consider whether a stay is conducive or detrimental to commercial morality and to the interests of the public at large.

4.The Liquidators have filed a report confirming that they have identified no matters that require investigation or call into question the propriety of the conduct of the Company’s affairs.  The fees of the Liquidators and the Official Receiver have been provided for and the Official Receiver has raised no objection to the application.

5.I am satisfied on the evidence before me that the restructuring of the Company’s debt will result in it being returned to solvency as Yidong does not intend to enforce debts it has bought.  The stay is for a sensible and discernible purpose and all those interested in the liquidation, creditors and Mr Chan, benefit from it and nobody has objected to it.

6.I will, therefore, grant the stay sought.

Ms Elaine Liu, instructed by Philip TF Wong & Co, for the petitioner

Chan King Man, the 1^st respondent, in person (did not file any written submissions)

The provisional liquidator of Smartech Display Limited, the 2^nd respondent (did not file any written submissions)

Ms Ophelia Lok, Assistant Principal Solicitor for the Official Receiver