Re Hong Kong Building and Loan Agency Ltd
Court of First Instance
Miscellaneous Proceedings no 2268 of 2018
Harris J
20 august 2019

Company law — scheme of arrangement — sanction by court — modifications to scheme and scheme document after distribution of scheme document, before and at scheme meeting — whether modifications sufficiently explained before meeting or, if at the meeting, were sufficiently minor so that creditors were able to make informed decision whether to support scheme

C, a Hong Kong listed company, sought an order sanctioning a scheme of arrangement between C and some of its creditors involving a straightforward debt-for-equity swap (the “Scheme”). The Scheme was approved at the Scheme Meeting by 99.3 percent in value of the debt voted. However, certain modifications were made to the Scheme after the Scheme document was distributed to the Scheme creditors and before the Scheme Meeting; and also at the Scheme Meeting itself. The modifications related to inter alia interest accrued and to accrue on the principal of some of the debts, the postponement of the effective date and the revision of the timetable of the Scheme. At issue was whether the modifications affected the decision as to whether the Scheme should be sanctioned.

Held, granting the application, that:

1) There were no Hong Kong decisions which dealt with the question of amendments after the distribution of Scheme document. (See paras. 4, 8.)
2) However, it was largely a question of common sense. If, as here, the amendments were mainly matters of detail which did not impact on a consideration of whether or not the scheme should not be approved, they would not jeopardise the ability of the company to obtain sanction of the scheme (APB Holding Ltd [1991] NI 17 considered). (See para. 9.)
3) The relevant principle was that it was necessary for creditors to be given sufficient information about the scheme to enable them to make an informed decision whether or not to support it. If modifications were either sufficiently explained before a meeting, or if at the meeting they were sufficiently minor that they were unlikely to infringe this principle, they would be unobjectionable. This was the case here (Re Peninsula and Oriental Steam Navigation Company [2006] EWHC 389 (Ch), Peninsula and Oriental Steam Navigation Company v Eller and Co [2006] EWCA Civ 432, Re Mongolian Mining Corp [2018] 5 HKLRD 48 applied). (See paras. 10–11.)

Application

This was an application for the sanction of a scheme of arrangement between the subject company and some of its creditors. The facts are set out in the judgment.

Jurisdictions: 

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