RE CHIME CORPORATION LTD

RE CHIME CORPORATION LTD

The court accepted substitution of the BOC HK$520m guarantee with a multi-currency cash deposit equal to 105% of HK$520m held in jointly operated interest bearing accounts because (a) the purpose of the security was to secure dividends payable by Chime which would be returned if the allotment were set aside, (b) existing protective undertakings made it improbable the funds originated from Chime or CAL so a personal undertaking was unnecessary, and (c) the proposed 105% buffer and a replenishment/drawdown regime adequately address exchange rate risk, making payment into court unnecessary.

Citation
RE CHIME CORPORATION LTD
Parties
Petitioner (joint Administrator): Tan Man Kou; Petitioner (joint Administrator): Cheung Yat Ming; 1st Respondent: Chime Corporation Limited; 2nd Respondent: Nina Kung alias Nina T H Wang; 3rd Respondent: Kung Yan Sum (formerly Gong Xian Xin); 4th Respondent: Forum Ever Limited; 5th Respondent: Focus Profit Limited; 6th Respondent: Liu Yuan Chun; 7th Respondent: Joseph Wing Kong Leung; 8th Respondent: Chan Kam Por; 9th Respondent: Kwok Ki Li
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
31 October 2003
Case Number
HCMP4146/2001
Procedural Posture
Companies Ordinance Proceedings (security for Dividends/allotment Challenge) / Interlocutory Summons to Vary Court Ordered Security
Outcome
Summons granted: the BOC guarantee discharged and replaced by ordered cash deposit under specified conditions
Legal Topics
Security for Dividends, Escrow Accounts, Bank Guarantees, Legal Charge Over Shares, Exchange Rate Risk, Undertakings and Protective Regimes
Source Language
EN
Company Law Insolvency/estate Administration Civil Procedure Security/guarantees Security for Dividends Escrow Accounts Bank Guarantees Legal Charge Over Shares +2 more

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Parties

Tan Man Kou

Petitioner (joint Administrator)

Cheung Yat Ming

Petitioner (joint Administrator)

Chime Corporation Limited

1st Respondent

Nina Kung alias Nina T H Wang

2nd Respondent

Kung Yan Sum (formerly Gong Xian Xin)

3rd Respondent

Forum Ever Limited

4th Respondent

Focus Profit Limited

5th Respondent

Liu Yuan Chun

6th Respondent

Joseph Wing Kong Leung

7th Respondent

Chan Kam Por

8th Respondent

Kwok Ki Li

9th Respondent

Procedural Posture

Companies Ordinance Proceedings (security for Dividends/allotment Challenge) / Interlocutory Summons to Vary Court Ordered Security

Legal Issues

  1. 1 Whether a bank guarantee of HK$520m can be discharged and replaced by multi-currency cash deposit
  2. 2 Whether the proposed funds are beneficially owned by the 2nd respondent or derived from Chime/CAL (circular financing risk)
  3. 3 Risk of exchange rate fluctuation for multi-currency deposit and adequacy of protective mechanism

Ratio Decidendi

The court accepted substitution of the BOC HK$520m guarantee with a multi-currency cash deposit equal to 105% of HK$520m held in jointly operated interest bearing accounts because (a) the purpose of the security was to secure dividends payable by Chime which would be returned if the allotment were set aside, (b) existing protective undertakings made it improbable the funds originated from Chime or CAL so a personal undertaking was unnecessary, and (c) the proposed 105% buffer and a replenishment/drawdown regime adequately address exchange rate risk, making payment into court unnecessary.

Court Disposition

Summons granted: the BOC guarantee discharged and replaced by ordered cash deposit under specified conditions

Orders

  • The Bank of China guarantee for HK$520,000,000 issued 13 November 2002 is discharged and replaced by a cash deposit by the 2nd respondent within 7 days equal to 105% of HK$520,000,000 in aggregate equivalent, in HKD, CAD and USD, to be placed in interest bearing accounts in the name of the 1st respondent operated by...
  • Deposited monies shall not be withdrawn except with written consent of both petitioners and 2nd respondent or in accordance with court directions; if aggregate HKD value falls below HK$520,000,000 continuously for more than 10 executive days 2nd respondent must top up within 10 days to restore 105% by reference to...