Read the full judgment text of HCMP 759/2021 on BabelCite. This Court of First Instance judgment was delivered on 6 October 2021 before Harris J.
Companies – scheme of arrangement – sanction – unsecured creditors – Companies Ordinance (Cap 622) ss 669, 670, 673, 674 and Part 13 Division 2 – application to convene scheme meeting granted 23 June 2021 – scheme meeting held 29 July 2021 – statutory majority of 76.9% by value obtained under s 674 – petition for sanction issued 20 August 2021 – Century Sun International Limited, a Hong Kong incorporated company within a Mainland-headquartered media group headed by StarTimes Communication Network Technology Co Ltd, engaged in international digital television broadcasting – business covers content procurement, production, delivery, satellite bandwidth resale and related transmission services – key African customer base with over 30 million ultimate customers and 30% of Pan-African market share – company profitable since 2018 after earlier accumulated losses caused by heavy investment and unstable early-stage revenue – winding-up petition (HCCW 214/2020) presented 14 July 2020 by a programme supplier – company has been pursuing debt restructuring to return to a solvent going concern – proposed scheme to discharge approximately US$121 million of unsecured debt – pro rata distribution of about HK$284.2 million from scheme funds – estimated 30% recovery for scheme creditors versus 14% in liquidation – unsecured debt split between Group affiliates (about 65%) and external creditors (about 35%) – external contracts governed by English, French, New York or Swiss law – release of CS Mauritius, a co-obligor, and Parent, a guarantor, intended to facilitate return of Group to viability – whether class properly constituted where opposing creditors held guarantees from CS Mauritius and the Parent and scheme released those third parties – Court held rights against third parties are not rights against the company and are not relevant to class constitution, following the principle stated in UDL Argos and applied in China Singyes – whether inter-company creditors' votes, comprising about 67% of the debt, should be discounted for additional interests – Court rejected the objection, holding that the focus is on why a creditor supported the scheme rather than why they might not, and the absence of evidence that the Group creditors would have voted differently but for their relationship with the Company – adequacy of explanatory statement – duty to provide all information necessary for creditors to form a reasonable judgement, including up-to-date information and an explanation of its absence – duty to provide independently verified financial information – explanatory statement only 25 pages, with no audited financial statements for the two most recent financial years and no independent verification of the liquidation scenario – Scheme not sanctioned – liberty to convene a further meeting with an adequate explanatory statement – Company to pay opposing creditors' costs of the sanction hearing with certificate for two counsel, such costs to be taxed if not agreed and paid forthwith.
Legal issues: Constitution of the class for scheme voting · Discounting inter-company creditors' votes for divergent interests · Adequacy of the Explanatory Statement
Outcome: Scheme of arrangement not sanctioned; liberty to convene a further scheme meeting with an adequate explanatory statement
Cited by 19 cases · Cites 4 cases