Re The Grande Holdings Ltd

HCCW 177/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 177 OF 2011

____________________

____________________

____________________

R U L I N G

____________________

1.On 15 April 2016 I sanctioned a scheme of arrangement compromising the debts of the company, which is listed on the Stock Exchange of Hong Kong (although its shares have been suspended for some years). Consistent with the terms of the scheme, on 26 April 2016, the joint and several provisional liquidators of the company issued a summons seeking various orders, principally a stay of the winding up.

2.The principles by reference to which the court considers applications for a permanent stay of winding up proceedings are well established. They are conveniently summarised in Re Outboard Marine Corp Asia Ltd [2003] 1HKLRD 585.  They are as follows:

(1)   the court has regard to the interests of members, creditors and the liquidator;

(2)   the court also considers whether the stay is conducive to commercial morality and the interests of the public at large;

(3)   in the circumstances of the case, whether if a stay is granted all creditors and potential outstanding liabilities of the company are provided for.

3.As a consequence of the scheme of arrangement which I have sanctioned, the first and third criteria are quite clearly satisfied.  When the application first came on before me I expressed some concerns about the second criteria. The joint and several provisional liquidators had submitted to the Official Receiver on 19 March 2014 a form D setting out in some detail their reasons for considering that the Official Receiver should investigate various aspects of the conduct of the directors of the company with the view to considering an application for disqualification.

4.I had two concerns.  The first was whether the granting of a stay would have the effect of preventing disqualification proceedings being commenced. The second was that the Official Receiver’s position in respect of criteria two was not entirely clear to me from the Official Receiver’s report.  As a result the application was adjourned and it came back on before me today.

5.It is common ground between the joint and several provisional liquidators and the Official Receiver that section 168H of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 allows an application for disqualification to be made against any person who has been a director of a company which has at anytime become insolvent, and if his conduct as a director of the company either taken alone or taken together with his conduct as a director of any other company, makes him unfit to be concerned in the management of a company.  It, therefore, follows that as in the present case there is no room for argument that the company has gone into substantial insolvency, an application for disqualification could be commenced if a stay is granted. 

6.The Official Receiver having considered the matter further, has concluded that given the matters brought to her attention by the joint and several provisional liquidators, her Department should continue with their investigation of the suspected misconduct of the part of the directors of the company, even if a stay is granted and the joint and several provisional liquidators released.  It seems to me that that is the correct decision.  I note that the joint and several provisional liquidators have offered to undertake to continue to assist the Official Receiver and provide her Department with any information they require in order to advance their investigations.  I do not require a formal undertaking to the court from them.  In my view it is sufficient that I have noted in these reasons what I have been told by counsel, Ms Rachel Lam, appearing on behalf of them today. 

7.In the circumstances I am satisfied that this is an appropriate case in which to grant a permanent stay of the winding up and I so order on the terms of the draft provided to me, the terms of which have been agreed with the Official Receiver.

Ms Rachel Lam, instructed by Lipman Karas, for the joint and several provisional liquidators

Ms Helen Chan, of the Official Receiver’s Office, for the Official Receiver