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Re Freeman Fintech Corporation Ltd

Judgment Cited authorities 12 Cited in Precedent Map Related
Vincent
Judgment Date02 February 2021
Neutral Citation[2021] HKCFI 310
Judgement NumberHCMP2304/2020
Citation[2021] 1 HKLRD 1178
Year2021
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP2304/2020 RE FREEMAN FINTECH CORPORATION LTD

HCMP 2304/2020

[2021] HKCFI 310

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2304 OF 2020

________________

IN THE MATTER of Freeman Fintech Corporation Limited (stock code: 279)

and

IN THE MATTER of section 670, 671, 673 and 674 of the Companies Ordinance, Chapter 622 of the Laws of the Hong Kong Special Administrative Region

________________

Before: Hon Harris J in Court

Date of Hearing: 2 February 2021

Date of Decision: 2 February 2021

________________

D E C I S I O N

________________


The Petition

1. On 24 December 2020 I granted leave pursuant to section 670 of the Companies Ordinance (Cap 622), for Joint Provisional Liquidators of the Company to convene a meeting of its unsecured creditors in order that they could consider and vote on a proposed scheme of arrangement to compromise the unsecured debt of the Company (“Scheme”). The meeting took place on 22 January 2021. The Scheme was approved unanimously.

2. I have heard this morning the petition to sanction the Scheme which was issued on 27 January 2021. A parallel scheme has been introduced in the Cayman Islands in which the Company is incorporated. I understand that the hearing of the necessary petition in the Cayman Islands will be heard before Mr Justice Segal on 3 February 2021.

Background

3. As I have mentioned the Company is incorporated in the Cayman Islands and this explains the reason for the introduction of a parallel scheme. The Company is listed on the Stock Exchange of Hong Kong Limited (“Exchange”). It is insolvent.

4. On 10 May 2019 a winding-up petition was presented. On 28 February 2020 the Joint Provisional Liquidators were appointed over the Company. On 26 March 2020 Linda Chan J extended their powers to include exploring a possible restructuring of the Company’s debt. On 28 February 2020 trading in its shares on the Exchange was suspended. The Exchange has imposed conditions on the Company which if not satisfied by 27 August 2021 will result in its shares being delisted. Ninety-seven percent of the debt of the Company is secured. I am told that the secured creditors support the Scheme. As I have already mentioned the Scheme, however, only compromises unsecured debt.

Relevant Legal Principles

5. The principles which guide the court in determining whether or not to sanction a scheme of arrangement are explained in [13]–[14] of my decision in Re Mongolia Mining Corporation [1]:

“13. The function of the court at the hearing of a petition to sanction a scheme is to consider—

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

(b) whether creditors 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;

(c) whether the meeting was duly convened in accordance with the court’s directions;

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

(e) whether the necessary statutory majorities have been obtained; and

(f) 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 the class within which he voted might reasonably approve the scheme.

See Re Dorman, Long & Co Ltd;[2] Re China Light & Power Co Ltd;[3] Re Cable & Wireless HKT Ltd;[4] Re PCCW Ltd;[5] Re Wheelock Properties Ltd;[6] Re Cheung Kong Holdings Ltd;[7] Re China Assets (Holdings) Ltd;[8] Re Enice Holding Company Ltd.[9]

14. First, it is well-established that debt restructuring is a permissible purpose of a scheme of arrangement.”

6. In the present case it seems to me that these criteria are clearly satisfied. The Scheme is very simple and as I have mentioned has been unanimously approved by those creditors who attended the Scheme meeting in person or proxy and voted. There is only one issue which requires some consideration before determining whether or not the Scheme should be sanctioned and that concerns the debt of a PRC based creditor of the Company (“PRC Creditor”).

Debt not governed by Hong Kong law

7. The PRC Creditor is owed approximately HK$48 million which represents approximately 1.5% of the total unsecured debt of the Company. The PRC Creditor’s debt is governed by Macanese law. The PRC Creditor with whom the Joint Provisional Liquidators’ staff have previously liaised by telephone has been sent a copy of the Scheme document and the notice of the Scheme meeting and the proxy forms. These he would have received by 30 December 2020. The PRC Creditor has not, however, returned a proxy form, a notice of claim or made any contact with the Joint Provisional Liquidators concerning his debt or the scheme.

8. It is a well-established common law rule that a foreign composition does not discharge a debt unless it is discharged under the law governing the debt. This is the “Rule in Gibbs” as discussed in my decision in the matter of China Lumena New Materials Corporation [10]:

“There is only one matter which requires consideration and that is that some of the debt is not governed by Hong Kong law. This is of particular significance as this is the first case of which I am aware of a scheme purporting to compromise debt governed by Mainland law. As I explain in [34] of my decision in Winsway Enterprises Holdings Ltd [11], it is a well-established common-law rule (the Rule in Antony Gibbs & Son v La Société Industrielle et Commerciale des Métaux [12]which is followed in Hong Kong) that a foreign composition does not discharge a debt unless it is discharged under the law governing the debt. This does not affect the court’s jurisdiction to sanction a scheme. The jurisdiction under section 673 is not limited to compromises of rights governed by Hong Kong law. It...

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