IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES WINDING-UP PROCEEDINGS NO. 618 OF 2001
Coram: Hon Yuen J in Chambers
Date of Hearing: 1 November 2001
Date of Decision: 1 November 2001
D E C I S I O N
1. This is an application under Sections 227A and 227B of the Companies Ordinance. Section 227A provides that
Section 227A(2) provides that:
Section 227B provides that:
2. Before I deal with the merits of this application, I would first refer to the procedure. It is clear under Section 227A that a privateprovisional liquidator may make the application to the court for a regulating order. Section 227A(2) also says that where a regulatingorder is made, Section 227B shall apply to the winding up. However, Section 227B(1) says expressly that the court may “on the applicationof the Official Receiver” by order dispense with the summoning of first meetings of creditors and contributories, etc. It would appeartherefore that under Section 227B, a literal interpretation of the express provisions of sub-section (1) would restrict the applicationunder Section 227B to one made by the Official Receiver and not by a private provisional liquidator.
3. Accordingly, when the present application was made by summons by the Provisional Liquidators only, I queried their locus standi to apply under Section 227B. It may well be that the draftsman was not aware of certain other provisions when he drafted Section227B(1) to refer to the Official Receiver only, but be that as it may, in light of the express provision of Section 227B(1), it seems to me that there was at least a substantial query as to the Provisional Liquidators’ locus standi. Consequently this morning, a joint application was made for the order under Section 227A and 227B by the Official Receiver and theProvisional Liquidators. I am told by the Official Receiver that the attention of the law draftsman will be brought to what wouldappear to be an unnecessary distinction between Section 227A and Section 227B. I now come to the merits of this application.
4. Section 227A makes it quite clear that a regulating order would be appropriate where there is a large number of creditors or contributoriesor for any other reason the interest of the creditors so require. The Company in this case is a supermarket with a large number ofsuppliers and employees. According to the report of the Provisional Liquidators, the Company has about 520 employee creditors and950 trade creditors. It would appear that the dividends will not be optimistic as the Provisional Liquidators estimate that the unsecuredcreditors are likely to receive no more than 4.5% by way of dividend.
5. The Provisional Liquidators have done an estimate of the costs for summoning a first creditors meeting if one is to be called. Onthe basis that 5% of employees, 80% of ordinary creditors and 2% of cash coupon creditors attend the meeting, that would alreadycome up to 802 persons. Venues are not easy to come by for such a large number and it would appear that the offices of the ProvisionalLiquidators and of the Official Receiver and of the Labour Department would not be able to take such a large number. If a commercialvenue were to be used, that would take up a substantial amount of money. The estimated costs for summoning the first creditors meetinghave been set out in an attachment to the report, and it would appear that at the very least, something in the region of $145,000would have to be used, and if the commercial venue were to be used, that would come up to nearly $300,000. Further, the estimatedtime costs for summoning and attending the first creditors meeting, as far as the Provisional Liquidators staff is concerned, wouldvary between $121,000 odd to $214,000 odd.
6. The Provisional Liquidators had by way of correspondence sought the views of some of the larger creditors, and to this end they haverequested 42 major creditors of the Company who represent 78% of the total amount due to give their views on the first meetings ofcreditors and contributories, and the appointment of liquidators and the committee of inspection of the Company. I have read thestandard form of notice and a summary of the replies given. It would appear to be the majority view of this 78% of the total creditorsin value and 42 in number of the major creditors that the first meeting of creditors and contributories should be dispensed withand that these Provisional Liquidators should carry on as Joint and Several Liquidators.
7. I have no doubt that in order to save on the available assets of the Company and in view of the large number of creditors, that aregulating order under Section 227A should be made and I so make it.
8. In relation to the application in Section 227B, it seems to me that it would only be natural for these Provisional Liquidators tocarry on as full liquidators. These liquidators first came onto the scene when by an order made by myself on 20 June 2001 on an exparte application made by the Petitioner, Messrs O’Driscoll and Liu, partners in the firm of Ernst & Young, were made ProvisionalLiquidators. In light of the fact that some 4 months have passed and that they have been carrying out the work of liquidating (provisionally)this company, it seems to me that it would be natural to let them carry on, thereby saving the estate the costs of any new liquidatorscoming in and duplicating costs. There seems to be no one who has suggested a different set of liquidators, and the Official Receiverhas joined in the present application and has expressed no objection to these Provisional Liquidators being appointed as Joint andSeveral Liquidators.
9. In relation to the committee of inspection, at first some 11 names had been put forward by the Provisional Liquidators as membersof the committee of inspection. However, 11 seems to be too large a number. In England, the Insolvency Rules expressly provide thatthe committee of inspection should be between 3 and 5 persons, and in Re BCCI Finance International Limited and Re Bank of Credit and Commerce Hong Kong Limited (1992) CWU No. 217 and 218 of 1991, the then companies judge set a maximum limit at 7. Following that case and in light of the factthat having too many members on the committee of inspection would only waste costs and not necessarily be more efficient, the ProvisionalLiquidators have at the court’s request pruned down the list of members to 7, deleting the 4 creditors whose debts are of the leastvalue.
10. Accordingly, I am prepared to make an order
11. Finally, as for the costs of these two summonses, it has been agreed that the costs of the application including the previous summonsbe to the Official Receiver to be taxed and paid out of the assets of the Company. As far as the Provisional Liquidators’ own costsare concerned, these should be costs in the liquidation.
Ms C Wong, of Messrs Wilkinson & Grist, for the Provisional Liquidators
Ms McKenna, from the Official Receiver’s Office