Re Zpmc-red Box Energy Services Ltd

HCCW 368/2021

[2023] HKCFI 1207

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 368 OF 2021

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D E C I S I O N

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1.RBF HK Limited (“RBF”) seeks a validation order under s.182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap.32, in respect of (1) the transfer of the shares of ZPMC Offshore Services Company Limited (“ZPMC Offshore”) in the Company to itself and (2) the consequent entering of RBF’s name in the Company’s register of members.

2.The Company was ordered to be wound up on 21st October 2022. RBF’s current application has been served on the Petitioner and the provisional liquidators.

2.1  The Petitioner has indicated that it takes a neutral stance and has asked to be excused from the hearing, but has submitted that the share transfer (1) would not be of any benefit to the Company’s creditors, and (2) would serve no useful purpose as RBF is unlikely to receive any distribution given that the Company is hopelessly insolvent and given that insofar as RBF has any views regarding the liquidation, it can put them forward as a (minority) contributory.

2.2  The provisional liquidators have indicated that they take a neutral stance, and have indicated that it appears that the Company is overwhelmingly insolvent.

3.The background to the application is as follows.

3.1  On 6th December 2022, the Arbitral Tribunal in HKIAC/PA 19158 handed down its Fourth Partial Final Award, holding that RBF was entitled to purchase ZPMC Offshore’s shares and ordering ZPMC Offshore to execute the necessary instruments of transfer of the shares in favour of RBF and to take actions to procure the entering of RBF’s name in the register of members of the Company.

3.2  Although the Company is in liquidation, RBF is keen to acquire the shares so as to be able to exercise its rights as a majority, rather than minority, contributory of the Company, and to be able to present its views regarding the Company’s liquidation as a majority contributory.

4.The relevant principles are as follows.

4.1  In determining whether or not to grant an application for validation of a share transfer, the question is whether the creditors might be better or worse off if the transfer is not sanctioned, in the event that a winding-up order is made: Re Belgravia Properties Ltd [2015] 1 HKLRD 509 at [6].

4.2  The same approach applies after a winding-up order has been made: Re Aether Ltd [2021] HKCFI 2647 at [4] (the company in that case having been ordered to be wound up previously: Re Aether Ltd [2021] HKCFI 1695).

4.3  The object of s.182 is to prevent a shareholder from evading his liability to contribute by transferring his shares to an impecunious party. A transfer of fully paid up shares will therefore generally be unobjectionable. See Re Belgravia Properties Ltd at [7] to [9].

5.In the present case, the shares have been fully paid up. Sanction of the transfer would not prejudice the Company’s creditors. There is no requirement that the transfer should confer positive benefits on the creditors. The Arbitral Tribunal has ruled that RBF is entitled to the shares and RBF seeks to be able to exercise its rights as a majority contributory, so it cannot be said that the validation would serve no useful purpose.

6.In the circumstances, I grant the application, with no order as to costs.

The attendance of Lau, Horton & Wise LLP for the Petitioner was excused

Mr John Leung, instructed by Shearman & Sterling, for RBF HK Limited

Mr James Wardell of the Provisional Liquidators