In the Matter of Z-OBee Holdings Limited and In the Matter of the Companies Act 1981 – Reasons

Oct 2017

BERMUDA

SUPREME COURT

WINDING-UP PROCEEDINGS – PROVISIONAL LIQUIDATION FOR RESTRUCTURING PURPOSES – APPLICATION BY JOINT PROVISIONAL LIQUIDATORS FOR VALIDATION ORDER IN RELATION TO SHARE TRANSFERS – GOVERNING PRINCIPLES – COMPANIES ACT 1981, SECTION 166

Background

In February 2017, the Court granted the company’s application to appoint Joint Provisional Liquidators (“JPLs”) for restructuring purposes.

On 9 October, 2017 the JPLs applied for a validation order that:

1. The transfer of legal title to fully paid shares in the company, brought about by the delisting of the company’s shares on the Singapore Stock Exchange, shall not be void by virtue of section 166 of the Companies Act, 1981 in the event of a winding- up order being made in respect of the company.
2. The JPLs be authorized to make such arrangements as they consider appropriate, and without further order from the Court, for the amendment of the company’s register of members.

The Court granted the validation order on 13 October 2017. These are the reasons for that decision.

The commercial and practical reasons for the application

The application for the validation order was made, prior to a potential sanction application for a scheme of arrangement, for the following reasons:

• The shares of the company are listed on the Hong Kong Stock Exchange and the Singapore Stock Exchange. Trading of shares on the Singapore exchange has been very low and the JPLs considered the cost of maintaining the secondary listing unjustified. They proposed the company delist the Singapore shares and transfer them, either to a party which will allow the shares to be listed on the Hong Kong exchange or direct to the beneficial owners. The JPLs could see no adverse consequences for the holders of the Singapore shares from this transfer.
• The potential problem was that, in the event that restructuring fails and a winding-up order is made against the company, under Section 166 of the Companies Act 1981, the listing transfers would need to be unwound, which would be extremely complex and perhaps impossible.
• Section 166 provides that: ‘In a winding-up by the Court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding-up, shall, unless the Court otherwise orders, be void.
• The JPLs wished to extinguish the risk and potential costs of the listing transfers being voided, and so sought the validation order. The Court found these reasons clear and compelling.