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Re China Lumena New Materials Corp. (In Provisional Liquidation)

Judgment Cited authorities 6 Cited in 6 Precedent Map Related
Vincent
Judgment Date04 March 2020
Neutral Citation[2020] HKCFI 338
Year2020
Judgement NumberHCMP2234/2019
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP2234/2019 RE CHINA LUMENA NEW MATERIALS CORP. (IN PROVISIONAL LIQUIDATION)

HCMP 2234/2019

[2020] HKCFI 338

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2234 OF 2019

________________

IN THE MATTER of China Lumena New Materials Corp (In Provisional Liquidation) (中國旭光高新材料集團有限公司) (臨時清盤中)

and

IN THE MATTER of sections 673 and 674 of the Companies Ordinance (Cap 622)

and

IN THE MATTER of Order 102 rule 5 of the Rules of the High Court (Cap 4A)

________________

Before: Hon Harris J in Court
Date of Hearing: 23 January 2020
Date of Decision: 23 January 2020
Date of Reasons for Decision: 4 March 2020

________________________________

REASONS FOR DECISION

________________________________

1. I have before me the Company’s petition dated 16 January 2020 seeking the courts sanction under section 673 of the Companies Ordinance of a scheme of arrangement between the Company and the unsecured creditors of the Company. The scheme forms part of a wider restructuring which involves new investors acquiring a controlling stake in the Company with a view to saving the Company’s Hong Kong listed status, which is it’s only asset of any value. Without the realisation of the value of the listing status it is anticipated that the recovery for unsecured creditors will be zero. The Company was incorporated in the Cayman Islands, registered in Hong Kong as a non-Hong Kong company and has been listed since the 16 June 2009. The Company was an investment holding company and the ultimate parent of a group of companies with principal operations in the Sichuan province of the People’s Republic of China with intermediate subsidiaries in the Cayman Islands, the British Virgin Islands, Hong Kong and the Mainland.

The group was principally engaged in the processing and sale of powder thenardite, specialty thenardite and medical thenardite and in the manufacture and sale of polyphenylene sulfide products. The group’s operations essentially ceased in or around 2014.

2. In February 2015, due to financial distress, the Company was subject to Cayman provisional liquidation.

3. In March 2017, the Provisional Liquidators were recognised and granted assistance by this Court.

4. As the Company’s only asset with clear realisable value is its Hong Kong listing status. The Provisional Liquidators have sought to “realise” the Company’s listing status so that the Company could resume trading its shares, with a view to maximising creditors’ recovery.

5. The Provisional Liquidators’ efforts led to entry into the restructuring framework agreement with the investors and the submission of the resumption proposal to the Stock Exchange.

6. The Scheme forms part of the resumption proposal. The Scheme Creditors’ recovery under the Scheme was originally estimated to be about 1% on the basis of the Company’s known indebtedness being about US$980 million. However, in light of the claims submitted at the Scheme Meeting which amounted to some US$1.5 billion, the Scheme Creditors’ recovery under the Scheme is now estimated to be about 0.7%. However, absent the Scheme and in a liquidation, the Scheme Creditors will recover nothing: see the 3rd Affirmation of Man Chun So dated 21 January 2020.

7. On 27 November 2019, the Stock Exchange gave its in-principle approval of the new listing application.

8. In considering whether to sanction a scheme, the court applies some well-established principles which were recently restated in Re Mongolian Mining Corp [1] and Re Da Yu Financial Holdings Ltd [2] such that the Court would consider in particular the following:

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

(2) whether creditors who were called on to vote as a single class had sufficiently similar legal rights such 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 creditors 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 majorities have been obtained;

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

(7) in an international case, whether there is sufficient connection between the scheme and Hong Kong, and whether the...

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4 cases
  • Re The Joint Provisional Liquidators Of Moody Technology Holdings Ltd (滿地科技股份有限公司) (In Provisional Liquidation For Restructuring Purposes
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 12 Marzo 2020
    ...scheme of arrangement in Hong Kong. See, for example, Re LDK Solar Co Ltd [2015] 1 HKLRD 458 and Re China Lumena New Materials Corp [2020] HKCFI 338. Recognising and assisting foreign soft-touch provisional liquidators is thus to a large extent merely applying orthodox principles of private......
  • Freeman Fintech Corporation Ltd
    • Cayman Islands
    • Grand Court (Cayman Islands)
    • 4 Febrero 2021
    ...Sons v. La Société Industrielle et Commerciale des Metaux(1890), 25 Q.B.D. 399, considered. (2) China Lumena New Materials Corp., In re, [2020] HKCFI 338, considered. (3) Lehman Brothers Intl. (Europe) (No. 10), In re, [2018] EWHC 1980 (Ch); [2019] BCC 115; [2019] Bus. L.R. 1012, considered......
  • Re China Beidahuang Industry Group Holdings Ltd
    • Hong Kong
    • 12 Diciembre 2023
    ...[15] Re OJSC International Bank of Azerbaijan[2018] EWCA Civ 2802, §28; Re China Lumena New Materials Corp (In provisional liquidation) [2020] HKCFI 338, [16] The changes are summarized in a table at §9 of Chen 4th [17] Letter from the Board, p.22; Appendix 5 to Composite Document [18] Sche......
  • Re Freeman Fintech Corporation Ltd
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 2 Febrero 2021
    ...id="_ftn7" onclick="Javascript:void(0)" style="color=black;">[7] [2015] 2 HKLRD 512. [8] [2017] HKEC 2641. [9] [2018] HKCFI 1736. [10] [2020] HKCFI 338 at [11] [2017] 1 HKLRD 1. [12] ((1890) 25 QBD 399). [13] [2001] EWCA Civ 1696 at [27] (Peter Gibson LJ). [14]...
1 firm's commentaries
  • Restructuring & Insolvency in Hong Kong – Recent Key Cases Update
    • Hong Kong
    • JD Supra Hong Kong
    • 29 Marzo 2021
    ...against the company in Hong Kong.In the decision, the Court referred to its earlier decision in Re China Lumena New Materials Corp [2020] HKCFI 338, which was the first reported case in Hong Kong involving a scheme of arrangement purporting to compromise PRC law-governed debt. The Court san......

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