Re Everlight (Hong Kong) Ltd

HCMP 1632/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1632 OF 2005

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Before: Hon Kwan J in Court

Date of Hearing:  17 March 2006

Date of Judgment:  17 March 2006

Date of Handing Down of Reasons for Judgment: 21 March 2006

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REASONS  FOR  JUDGMENT

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1.This is a petition presented by Everlight (Hong Kong) Limited (“the Company”) to confirm a reduction of capital.

2.The Company was incorporated on 23 June 1992.  Its present authorised share capital is HK$15 million, divided into 1.5 million shares of HK$10.00 each, all of which have been issued and are fully paid up.  Since 30 December 2004, the sole shareholder of the Company is Everlight Chemical Industrial Corporation of Taiwan (“Everlight Chemical”).  New directors were appointed to replace the old directors in January 2005.

3.The Company has been carrying on business shortly after its incorporation.  It sells chemical dyes, electronic chemicals and carbon powder made in Taiwan.

4.There is provision in the articles of association for reduction of the share capital.  Furthermore, Table A in the First Schedule to the Companies Ordinance, Cap. 32, as adopted by the Company, provides that the Company may by special resolution reduce its share capital.

5.By a special resolution passed on 5 May 2005, it was resolved that the share capital be reduced from HK$15 million to HK$10 million, divided into 1 million ordinary shares of HK$10.00 each, and that such reduction be effected by the cancellation of 500,000 ordinary shares of HK$10.00 each and that issued and paid up capital of HK$5 million is to be returned to Everlight Chemical.

6.The directors proposed a reduction of capital as they have come to the view that the amount to be reduced is in excess of the wants of the Company and cannot be usefully employed in business.

7.The Company has no debentures and no debenture stock and none of its property is charged in any way.

8.There are produced in evidence the latest audited accounts for the year ended 31 December 2004 and the management accounts for the period from 1 January 2005 to 31 December 2005 and as at 31 January 2006.  According to the audited financial statements, the Company recorded a net profit of HK$1.4 million odd for the year ended 31 December 2003 and a dividend of HK$4.5 million was declared.  For the year ended 31 December 2004, a net profit of HK$1.1 million was recorded and a dividend of HK$1.5 million was declared.  The accumulated profits for the period ended 31 December 2004 were HK$1,232,823.99 and current net assets stood at HK$10,846,623.58.  For the period of January to December 2005, the Company recorded a net profit of HK$306,792.30.

9.As at 31 January 2006, the Company has a total indebtedness of HK$326,299.24 owed to four creditors.  Current net assets are in the region of HK$12.9 million.

10.I note from the management account as at 31 January 2006 that the Company has a time deposit of HK$5,734,476.99 in its bank account.  This is to mature on 28 February 2006.  Apart from this, the Company has cash on hand of HK$84,299.00 and a bank balance of HK$1,707,603.93.  The Company would appear to have sufficient funds to make the proposed return of capital of HK$5 million to the sole shareholder and to settle the debts owed to all its creditors.  To give further protection to the creditors, Everlight Chemical has agreed in a written confirmation dated 24 February 2006 that it would first pay off the said debts of all its creditors before it is to receive the return of capital of HK$5 million from the Company.

11.According to the management of the Company, the value of the purchases of the Company is around HK$1 million per month.  The customers of the Company have good payment records and there was seldom bad debt.  The sales proceeds of the Company from time to time are regular and sufficient to support the purchases of the Company.  The directors are of the view that after the reduction of capital, the Company is financially sound and would have sufficient cash flow to carry out its operations.

12.At the hearing of the summons for directions on 28 February 2006, I made an order to dispense with the settlement of a list of creditors, having been satisfied that the interests of creditors would not be prejudiced.  There is no material change in financial position of the Company at the hearing of the petition.  The directions for advertisement of a notice of the petition have been complied with.

13.The jurisdictional requirements to confirm a reduction of capital have all been satisfied.  There is a discernible purpose for the reduction.  This is an appropriate case to confirm the reduction of capital.  I have therefore made an order in terms of the draft submitted as amended.

Miss Winnie Lau, instructed by Messrs King & Co., for the Petitioner