RE PCCW LTD

RE PCCW LTD

The court refused to disenfranchise or disregard the impugned votes en masse because the evidence did not plainly establish manipulation sufficient to negate bona fides of the statutory majority; where some targeted misconduct was proved (findings against certain brokers/actors), that did not undermine the overall statutory majority or justify refusing sanction; accordingly the court exercised its discretion to sanction the Scheme and confirm the reduction of capital.

Citation
RE PCCW LTD
Parties
Petitioner: The Company; Joint Offeror / Respondent: Pacific Century Regional Developments Limited; Joint Offeror / Respondent: Starvest Limited; Joint Offeror / Respondent: China Netcom Corporation (BVI) Limited; Intervener: Securities and Futures Commission; Objectors / Independent Shareholders: Wong Yuk Kwun; Hung Sau Chun; Wong Lai Chun
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
6 April 2009
Case Number
HCMP2382/2008
Procedural Posture
Scheme of Arrangement / Sanction Petition / Sanction Hearing and Judgment
Outcome
Petition granted; Scheme of arrangement sanctioned by the Court and reduction of share capital confirmed
Legal Topics
Scheme of Arrangement, Share Splitting, Majority in Number Requirement, Proxy Voting and Nominee Arrangements, Market Manipulation/inference Drawing, Reduction of Share Capital
Source Language
EN
Company Law Securities Regulation Takeovers and Mergers Equity/remedies Scheme of Arrangement Share Splitting Majority in Number Requirement Proxy Voting and Nominee Arrangements +2 more

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Parties

The Company

Petitioner

Pacific Century Regional Developments Limited

Joint Offeror / Respondent

Starvest Limited

Joint Offeror / Respondent

China Netcom Corporation (BVI) Limited

Joint Offeror / Respondent

Securities and Futures Commission

Intervener

Wong Yuk Kwun; Hung Sau Chun; Wong Lai Chun

Objectors / Independent Shareholders

Procedural Posture

Scheme of Arrangement / Sanction Petition / Sanction Hearing and Judgment

Legal Issues

  1. 1 Whether votes arising from recent transfers/splitting of shares to increase head-count should be disregarded when exercising the court's discretion to sanction a scheme of arrangement
  2. 2 Whether the statutory majority who approved the scheme acted bona fide and were not coercing the minority
  3. 3 Whether the evidence justifies drawing inferences of fraud or manipulation from interview records and transfer patterns

Ratio Decidendi

The court refused to disenfranchise or disregard the impugned votes en masse because the evidence did not plainly establish manipulation sufficient to negate bona fides of the statutory majority; where some targeted misconduct was proved (findings against certain brokers/actors), that did not undermine the overall statutory majority or justify refusing sanction; accordingly the court exercised its discretion to sanction the Scheme and confirm the reduction of capital.

Court Disposition

Petition granted; Scheme of arrangement sanctioned by the Court and reduction of share capital confirmed

Orders

  • Scheme of arrangement sanctioned by the Court
  • Reduction of share capital confirmed pursuant to section 59 of Cap. 32