Re Faith On International Ltd.

Re Faith On International Ltd.

The court applied the rights test for class constitution, held that the meetings were not unrepresentative and that inclusion of internal creditors did not produce confiscation or injustice; disclosure and valuation of disputed claims were not shown to be made in bad faith nor likely to have materially affected votes; accordingly the court exercised its discretion to sanction the 25 Schemes of Arrangement subject to the stated condition precedent (Stock Exchange approval).

Citation
Re Faith On International Ltd.
Parties
Petitioners: UDL Holdings Limited and 24 subsidiaries (UDL Group); Respondent / Disputed Creditor: Nishimatsu Construction Company Limited; Opposing Creditors: Opposing Preferential Creditors
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
18 April 2000
Case Number
HCMP430/2000
Procedural Posture
Scheme of Arrangement Petitions Under Companies Ordinance (cap.32) / Sanction Hearing (court of First Instance)
Outcome
25 Schemes of Arrangement sanctioned by the Court (subject to condition precedent)
Legal Topics
Scheme of Arrangement, Creditor Classification and Classes Meetings, Voting Thresholds and Majority, Preferential and Secured Creditor Treatment, Disputed Claims Valuation, Waiver of Procedural Irregularities, Court Discretion in Sanctioning Schemes
Source Language
EN
Company Law Insolvency Law Civil Procedure Scheme of Arrangement Creditor Classification and Classes Meetings Voting Thresholds and Majority Preferential and Secured Creditor Treatment Disputed Claims Valuation +2 more

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Parties

UDL Holdings Limited and 24 subsidiaries (UDL Group)

Petitioners

Nishimatsu Construction Company Limited

Respondent / Disputed Creditor

Opposing Preferential Creditors

Opposing Creditors

Procedural Posture

Scheme of Arrangement Petitions Under Companies Ordinance (cap.32) / Sanction Hearing (court of First Instance)

Legal Issues

  1. 1 Whether internal creditors may vote as part of the same class or must be excluded
  2. 2 Whether preferential creditors or disputed creditors required separate class meetings
  3. 3 Whether meetings were unrepresentative such that court should withhold sanction

Ratio Decidendi

The court applied the rights test for class constitution, held that the meetings were not unrepresentative and that inclusion of internal creditors did not produce confiscation or injustice; disclosure and valuation of disputed claims were not shown to be made in bad faith nor likely to have materially affected votes; accordingly the court exercised its discretion to sanction the 25 Schemes of Arrangement subject to the stated condition precedent (Stock Exchange approval).

Court Disposition

25 Schemes of Arrangement sanctioned by the Court (subject to condition precedent)

Orders

  • Sanction granted for the 25 Schemes of Arrangement before the court
  • Sanction conditional upon fulfillment of Stock Exchange approval by 30 April 2000 or such later date as the court may allow