RE INTELLIGENT GROUP ENTERPRISE LTD HCMP 700/2007

S's Words:-
It is not a different task to increase capital. However, when one wants to reduce the share capitil of a limited company, passing a special resolution alone is not sufficient. Would you have a second thought before you make such a proposal?

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Date of Judgment: 26 June 2007

IN THE MATTER of Section 59 of the Companies Ordinance (Cap. 32)

This is a petition presented by Intelligent Group Enterprise Limited (“the Company”) for confirmation of reduction of its share capital and the cancellation of its share premium account.

There is provision in the articles of association of the Company that it may by special resolution reduce its share capital or any share premium account in any manner and with, and subject to, any incident authorised, and consent required, by law.

In the notice to convene the extraordinary general meeting and the circular to shareholders accompanying the notice, the purposes of the proposed reduction and cancellation of the share premium account were adequately explained to the shareholders.

The directors considered it would be in the interest of the Company to bring in another investor. ... To achieve a reasonable capital structure so as to bring in an investor to salvage the Company, the directors proposed to reduce the share capital to eliminate the accumulated losses and to return redundant capital locked up in non-business assets. This would bring the accounts more nearly into line with the business assets and bring forward the time when the Company would be in a position to pay dividends.

There was no opposition to the petition.

The conditions for a reduction of capital are satisfied in this instance. The shareholders are treated equitably in the proposed reduction and the proposals have been properly explained to them in the circular. The reduction is for a discernible purpose and [the Judge was] satisfied that the interests of creditors are adequately safeguarded. [The Judge had] made an order in terms of the draft submitted as amended.