Re Wing Tai Pilonner Co Ltd

HCMP 603/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 603 OF 2005

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Before: Hon Kwan J in Court

Date of Hearing: 13 May 2005

Date of Judgment: 13 May 2005

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J U D G M E N T

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1.This is a petition for confirmation of reduction of capital under section 59 of the Companies Ordinance, Cap 32.

2.Wing Tai Pilonner Company Limited (“the Company”) was incorporated on 17 April 1979.  Its present authorized capital is HK$3 million divided into 30,000 shares of HK$100.00 each, all of which are issued and fully paid up.  The business of the Company is that of a building contractor.

3.There are only 2 shareholders, Ng Yu Mau Raymond holding 24,000 shares and Ng Jing Yee holding 6,000 shares.

4.There is provision in the Articles of Association to reduce the share capital by special resolution.

5.By a special resolution dated 22 March 2005 signed by the two shareholders, it was resolved that the capital of the Company be reduced from HK$3 million divided into 30,000 shares of HK$100.00 each to HK$900,000.00 divided into 30,000 shares of HK$30.00 each, and that the capital reduction be effected by returning the paid-up capital to the extent of HK$70.00 upon each of the 30,000 shares.  It was further resolved that the sum of HK$2.1 million proposed to be returned be transferred to the distributable reserves of the Company and be distributed to the members on a pro rata basis in the proportion of the shares held by each.

6.In the opinion of the directors, the HK$2.1 million is in excess of the wants of the Company and can no longer be usefully employed in the business.  The business of the Company has begun to shrink since 1997.

7.The statements of accounts of the Company from 1997/98 to the year ended 31 March 2004 are exhibited.  The turnover in 2003/04, which was HK$14 million odd, was just in excess of 10% of that in 1997/98.

8.Since the financial year ended 31 March 2004, the Company has not taken up any new job and is only completing the old jobs.  It is now almost dormant.  According to the profit and loss account from 1 April 2004 to 28 February 2005, the jobbing income for this period only amounted to HK$220,300.00, just about 1.6% of the turnover in the last financial year.

9.It is uncertain how long the Company will remain in the present dormant position.  The Company has no plan of expansion in the coming years.  It is almost certain that its business will not recover to such an extent as in the 1990s.

10.After taking into consideration the likely turnover and corresponding operating costs of the Company, the directors are of the opinion that the present share capital is considerably more than the future needs of the Company and that a share capital of HK$900,000.00 will be sufficient.

11.The balances to the credit of the Company’s bank accounts in March 2005 are in the aggregate of HK$2.2 million odd.  It is proposed to effect a return of capital by transferring an equivalent sum out of the bank accounts to the distributable reserves of the Company for subsequent distribution to members.

12.According to the latest unaudited balance sheet, the total liabilities due to third parties as at 28 February 2005 amounted to HK$3,623.00.  As at 22 March 2005, the debts were reduced to HK$423.00.

13.At the hearing of the summons for directions on 26 April 2005, I was informed that only the telephone bill of an insignificant sum was outstanding.

14.No tax is payable by the Company as at the date of the affirmation in support made on 23 March 2005, as the Company is making a loss up to 28 February 2005 and the assessable profits would be wholly absorbed by the tax losses brought forward which amounted to approximately HK$3.6 million.  It is expected that the Company would still be making a loss by the end of the financial year ended 31 March 2005.

15.On 26 April 2005, I made an order that section 59(2) shall not apply as regards any class of creditors of the Company, having been satisfied that the cash standing to the credit of the Company at its bankers exceeded its debts and the amount of the capital proposed to be returned by the special resolution.  The directions for the advertisement of the notice of hearing of the petition have been complied with.

16.The Company has filed further evidence to update the court on its financial position since the last hearing.  As at 11 May 2005, it has a credit balance in its bank accounts in the aggregate sum of HK$2,228,494.51.  Its debts stood at HK$463.00.

17.The requirements for a reduction of capital have been complied with.  The reduction is for a discernible purpose.  I am satisfied that the proposed reduction is not likely to cause prejudice to the creditors.

18.I therefore make an order in terms of the draft submitted as amended.

Mr Anthony Cheung, instructed by Messrs Or, Ng & Chan, for the Petitioner