On 25 July 2019, China Agrotech Holdings Limited (now Da Yu Financing Holdings Limited) (stock code: 1073), a company incorporated in the Cayman Islands completed its successful restructure and re-listing on the Hong Kong Stock Exchange.
As part of the restructuring, the Company and its Hong Kong appointed Liquidators (subsequently recognised in the Cayman Islands) promoted parallel schemes of arrangement with the Company’s creditors in Hong Kong and in the Cayman Islands and sought confirmation of the reduction in capital as part of the post-liquidation restructuring. An EGM of the Company was held to obtain the required shareholder consent.
Following the objection of a shareholder at the EGM to the votes of a dissenting shareholder (DS), which it was alleged sought a ransom payment, the Chairman of the meeting disallowed the votes. Had the votes not been disapplied, the resolutions would not have been passed. Proceedings ensued in both the Cayman Islands and in Hong Kong:
- on 12 June 2019, the Company issued a summons in the Grand Court of the Cayman Islands, seeking a declaration that the resolutions were validly passed (the Cayman Summons); and
- on 26 June 2019, DS issued a summons in the High Court of Hong Kong, (the Hong Kong Summons) relating to the same issues and seeking a stay or dismissal of the Cayman Summons, pending a decision in Hong Kong on the Hong Kong Summons.
The Grand Court declined to order an adjournment or stay of the Cayman Islands Summons holding that in the circumstances the proper forum was that of the Cayman Islands. Justice Segal gave weight to the fact that the dispute related to the conduct of a meeting of shareholders of a Cayman Islands company, governed by Cayman Islands law. Additionally the dispute was closely connected to the capital reduction confirmation, being a matter for the Cayman Islands Courts and the assistance of the court was requested by the Hong Kong Liquidators.
Coming to the same conclusion as Mr Justice Harris in Convoy Global on interpretation, in a judgment on 16 July 2019, Justice Segal held that Article 77 of the Company’s articles of association applied such that the Chairman had the right to reject votes and that such decision was final and conclusive. Whilst a Chairman’s decision could be set aside on the basis of bad faith, no such bad faith had been made out and the decision was not otherwise flawed.