RE COSMOS MACHINERY ENTERPRISES LTD

RE COSMOS MACHINERY ENTERPRISES LTD

The correct interpretation is that Rule 2.10 does not prohibit offeror concert parties from voting at a Court Meeting; it requires that their votes be disregarded when determining compliance with the Code's approval thresholds. Because such shareholders are parties to the scheme under s.670(2)(b), they cannot be excluded from the notice of meeting; if necessary they may undertake not to vote but their mere presence or right to vote is not forbidden.

Citation
[2021] HKCFI 2088
Parties
Company: Cosmos Machinery Enterprises Limited 大同機械企業有限公司; Offeror and Concert Parties: Offeror and Concert Parties (unnamed)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
19 July 2021
Case Number
HCMP601/2021
Procedural Posture
Scheme of Arrangement (privatisation) Under Companies Ordinance / Chambers Decision on Convening Meeting and Voting Eligibility
Outcome
Order granted to convene a Court Meeting but the scheme did not proceed; court held that offeror concert parties may vote but their votes must be excluded for Takeovers Code calculations
Legal Topics
Scheme of Arrangement, Takeovers Code Rule 2.10, Voting Eligibility at Court Meeting, Section 670/674 Companies Ordinance
Source Language
EN
Company Law Takeovers and Mergers Corporate Governance Civil Procedure Scheme of Arrangement Takeovers Code Rule 2.10 Voting Eligibility at Court Meeting Section 670/674 Companies Ordinance

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Parties

Cosmos Machinery Enterprises Limited 大同機械企業有限公司

Company

Offeror and Concert Parties (unnamed)

Offeror and Concert Parties

Procedural Posture

Scheme of Arrangement (privatisation) Under Companies Ordinance / Chambers Decision on Convening Meeting and Voting Eligibility

Legal Issues

  1. 1 Whether offeror concert parties are prohibited from voting at the Court Meeting by Rule 2.10 of the Takeovers Code
  2. 2 Whether votes of offeror concert parties must be excluded from counting for the purposes of Rule 2.10
  3. 3 Whether notice of meeting may exclude shareholders who are parties to the scheme from voting

Ratio Decidendi

The correct interpretation is that Rule 2.10 does not prohibit offeror concert parties from voting at a Court Meeting; it requires that their votes be disregarded when determining compliance with the Code's approval thresholds. Because such shareholders are parties to the scheme under s.670(2)(b), they cannot be excluded from the notice of meeting; if necessary they may undertake not to vote but their mere presence or right to vote is not forbidden.

Court Disposition

Order granted to convene a Court Meeting but the scheme did not proceed; court held that offeror concert parties may vote but their votes must be excluded for Takeovers Code calculations

Orders

  • Order permitting Cosmos Machinery Enterprises Limited to convene a Court Meeting on 11 May 2021
  • Scheme abandoned and will not be implemented