||IN THE MATTER of Hong Kong Pharmaceutical Holdings Limited
||IN THE MATTER of Section 166 of the Companies Ordinance, Chapter 32
Before: Hon Kwan J in Court
Date of Hearing: 21 November 2006
Date of Judgment: 21 November 2006
Date of Handing Down of Reasons for Judgment: 21 November 2006
REASONS FOR JUDGMENT
1. Hong Kong Pharmaceutical Holdings Limited (“the Company”), acting by its provisional liquidators, presented a petition on 20 November 2006 for sanction of a scheme of arrangement with its creditors under section 166 of the Companies Ordinance, Cap. 32. As one of the conditions precedent to completion of the transactions contemplated in the scheme is the withdrawal of the winding-up petition against the Company in HCCW No. 1018 of 2004 and the discharge of the provisional liquidators, the summons issued by the petitioning creditor Goldon Investment Limited and a supporting creditor Umbrella Finance Company Limited (“Umbrella Finance”) seeking leave to withdraw the winding-up petition and other consequential directions was heard at the same time as the petition for sanction of the scheme of arrangement. At the conclusion of the hearing, I sanctioned the scheme and gave leave to withdraw the winding-up petition. These are the reasons for judgment.
2. The Company was incorporated in Bermuda and registered in Hong Kong under Part XI of Cap. 32 as an oversea company on 23 September 1997. Until 3 October 2001, it was registered under the name of Nam Pei Hong International Holdings Limited. The Company functioned as an investment holding company. Its shares have been listed for trading on the Main Board of The Stock Exchange of Hong Kong Limited. Trading in its shares has been suspended since 5 August 2004.
3. Provisional liquidators were appointed for the Company on 13 October 2004 on the application of Umbrella Finance. After conducting a review of the Company’s business, the provisional liquidators came to the view that one of the ways to maximise recoveries for the creditors was by a restructuring which realizes value from the listed status of the Company’s shares and its business of wholesale and retail sale of traditional Chinese medicines, other medicines, health products and dried seafood which is primarily operated under the name of Nam Pei Hong Sum Yung Drugs Company Limited (“Nam Pei Hong”), an indirect wholly owned subsidiary of the Company.
4. On 7 September 2005, a restructuring agreement was entered into between, inter alia, the Company and the investor, Gain Alpha Finance Limited (“the Investor”), giving effect to the restructuring proposal. By the proposal, the Investor is to acquire a controlling interest in the Company from the issue and allotment of new shares, in consideration of which the Investor will pay cash of HK$80.19 million, of which HK$45.5 million is to be distributed in accordance with the scheme and the balance of HK$34.69 million is to be provided as working capital for the restructured group of companies. The claims of the scheme creditors will be compromised and discharged in full through the scheme, in consideration of the Company transferring to the scheme trust account on the effective date the cash consideration aforesaid of HK$45.5 million, net cash disposal proceeds of approximately HK$18.9 million, any cash held by the Company, all receivables owned by it, and the interests of the Company in the excluded subsidiaries.
5. Immediately following the completion, the restructured group of companies will principally comprise Nam Pei Hong, NPH Sino-Meditech Limited (which operates a Chinese medicine clinic) and Poo Yuk Loong Limited (which holds the lease of a number of Nam Pei Hong’s retail outlets). The restructured group will be left with no liability at the Company level and Nam Pei Hong, NPH Sino-Meditech Limited and Poo Yuk Loong Limited will be left with manageable and serviceable trade debts.
6. The scheme of arrangement in Hong Kong is in addition to an identical scheme in Bermuda between the Company and its creditors. This is to ensure that all creditors are bound, since the Company’s principal place of business is in Hong Kong and all known claims against the Company are in respect of debts incurred in Hong Kong. The aggregate of the claims of scheme creditors as at 20 November 2006 was estimated at approximately HK$83 million odd.
7. On 14 March 2006, I made an order on the application of the provisional liquidators in HCMP No. 358 of 2006 for a scheme meeting of creditors to be held to consider the proposed scheme.
8. When the scheme meeting was held on 6 April 2006 pursuant to the order, theresolution proposed to the creditors was that the scheme be approved subject to the condition of a minimum return to the creditors of 40%. The conditional approval was not mentioned in the scheme notified to the creditors in the notice convening the meeting or in any of other materials in the composite document sent to the...