Re Mason Group Holdings Ltd

HCMP 1243/2023

[2024] HKCFI 445

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1243 OF 2023

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REASONS FOR DECISION

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1.On 7 November 2023 I heard the company’s petition seeking an order that a scheme of arrangement be sanctioned pursuant to sections 673 and 674 of the Companies Ordinance and a technical reduction of capital in connection with the scheme approved pursuant to section 229 of the Companies Ordinance.

2.The Company was incorporated in Hong Kong in August 2002 and has been listed on the Stock Exchange since January 2003. It is an investment company primarily engaged in various aspects of the securities investment business. The liquidity of the shares of the company have been illiquid over an extended period of time and on 30 May 2023 Liberty High Capital Limited requested the board of directors to put forward a proposal to take private the company by way of a scheme of arrangement. This scheme was approved by 99.62% of the voting rights attached to all scheme shares present and voting at the court meeting.

3.If the scheme is implemented it will involve all shares held by scheme shareholders being cancelled in exchange for a cancellation price of Hong Kong dollars 0.0338 per share, which represents a premium of approximately 20.7% over the closing price of the Company’s shares on the last pre-announcement trading date.

4.The functions of the court at the hearing of a petition to sanction a scheme have been fully summarised in my decision in Re SHK Hong Kong Industries Limited[1]. In short, the court will consider:

(1)  Whether the scheme is for a permissible purpose;

(2)  Whether members who were called on to vote as a single class had sufficiently similar legal rights that they could consult together with a view to their common interest at a single meeting;

(3)  Whether the meeting was duly convened in accordance with the Court’s directions;

(4)  Whether members have been given sufficient information about the scheme to enable them to make an informed decision whether or not to support it;

(5)  Whether the necessary statutory majority has been obtained; and

(6)  Whether the Court is satisfied in the exercise of its discretion that an intelligent and honest man acting in accordance with his interests as a member of a class within which he voted might reasonably approve the scheme.

5.Privatisation of a listed company is an acceptable and permissible purpose for such schemes of arrangement: see Re SHK Hong Kong Industries Limited[2].

6.Where the scheme involves a general offer or a takeover offer, section 674(2)(a) of the Companies Ordinance requires (i) support of a 75% majority of the voting rights of the shareholdings of the members present and voting; and (ii) votes cast against it must not exceed 10% of the voting rights attached to all disinterested shares within the meaning of the Companies Ordinance.

7.Insofar as the technical reduction of capital is concerned, the court will sanction this if it has been approved by a special resolution of members and the following requirements are satisfied:

(1)  The shareholders are treated equitably;

(2)  The reasons for the reduction are properly explained;

(3)  The interests of creditors are safeguarded; and

(4)  The reduction is for a discernible purpose.

A technical reduction which is integral to a scheme satisfies the above criteria: Re Joyce Boutique Group Ltd[3]; see also Re BOCI Research Ltd[4].

8.The Independent Financial Advisor (“IFA”) and the Independent Board Committee (“IBC”) have indicated their support for the Scheme as the IFA had advised that the Proposal and the Scheme were fair and reasonable and recommended the Scheme Shareholders to vote in its favour. In doing so, the IFA took into account inter alia the low trading liquidity of the Company’s shares and the cancellation price compared to the recent share price.

9.Insofar as the technical reduction of capital is concerned, this has been approved at general meeting. The shareholders were treated equitably; they have been given a detailed explanation through the Scheme Documents; creditors’ interests will not be prejudiced by the technical reduction for a brief time (since the equivalent amount of shares will be reissued shortly after the reduction); and there is a discernible purpose for it since it is an integral part of the Scheme. Settlement of a list of creditors of the Company was dispensed with pursuant to my order dated 18 October 2023.

10.As indicated by the proportion of shareholders voting in favour of the scheme, it has proved uncontroversial. I am satisfied that the criteria to which I have referred earlier are satisfied in the present case and I will sanction the scheme and reduction of capital and grant orders in the terms of the drafts presented to me.

Mr José Maurellet SC and Ms Jasmine Cheung, instructed by DLA Piper Hong Kong for the Company