China Agrotech Blog #1: Successful restructuring of China Agrotech Holdings
In the epic journey of China Agrotech Holdings Ltd, that saw it re-listed on the SEHK on 26 July 2019, some five years after its shares were suspended from trading, we bring you a series of blogs on the unusual and novel points of law that arose during the course of its journey.
China Agrotech Holdings Limited (now Da Yu Financing Holdings Limited) effected a successful restructuring of its HK$1,677.9 million of debt by way of a capital reorganisation and parallel schemes of arrangement in the Cayman Islands and Hong Kong.
The Company is incorporated in the Cayman Islands, listed on the Hong Kong Stock Exchange and was subject to liquidation under the laws of Hong Kong at the time of its restructuring.
The ultimate objective of the restructuring was to realise the value of the Company’s listing status on the SEHK for the benefit of its creditors, shareholders and stakeholders. Absent a restructuring, creditors were not expected to recover anything in the liquidation.
There were a number of novel elements to this restructuring including:
- Unique challenges posed by the Company being subject to a foreign liquidation but not an equivalent regime in its place of incorporation.
- The validity of Company resolutions necessary to effect the restructuring (including a reduction of the Company’s capital) were challenged by a shareholder. To address that challenge, the Company successfully sought a declaration regarding the validity of those resolutions. The Grand Court’s ruling (In re China Agrotech Holdings Limited, unreported, 16 July 2019) contains a thorough analysis of English and other common law authorities regarding the finality of decisions of a chairperson in general meetings and the power of a chairperson to reject shareholder votes.
- The Grand Court made a conditional scheme sanction order to address the uncertainty about whether the Hong Kong court would sanction the Hong Kong scheme given that scheme was subject to opposition. This appears to be the first occasion that a conditional sanction order has been made in the Cayman Islands and the Grand Court observed that a conditional order would allow it to retain control over the scheme process (In re China Agrotech Holdings Limited, unreported, 22 July 2019).
Harneys acted for the Company and its liquidators.The team was led by partners Ian Mann and Chai Ridgers in Hong Kong and the team comprised Jayson Wood and Paul Madden in the Cayman Islands and Charles Wong in Hong Kong.
Watch out for Blog 2 – “It's a matter of time” coming soon.