The Hong Kong Companies Court sanctioned the scheme of arrangement (“Scheme”) by Shimao Group Holdings Limited (“Company”): Re Shimao Group Holdings Limited [2025] HKCFI 1751. José-Antonio Maurellet SC and Look-Chan Ho acted for the Company.
The Company is part of a group of entities engaged in the principal business of real estate investment (“Group”). To address liquidity pressure in servicing its offshore debt obligations, the Company (incorporated in the Cayman Islands and registered as a non-Hong Kong company) engaged financial adviser to assist in formulating a restructuring scheme.
Whilst similar restructuring schemes not infrequently come before the Hong Kong Court, a number of features from the judgment are of potential interest for handling similar restructuring in the future.
Necessity of Approval from National Development and Reform Commission
As the Group’s business and operations are based in the Mainland, and that it will use revenue generated in the Mainland to make payments under the Scheme, it was necessary to seek approval from the NDRC. As explained by the learned Judge, the NDRC is responsible for formulating policies for conducting overseas investment and monitors, inter alia, the indebtedness of companies based in the Mainland and raised funds through offshore financing. However, it is also noted that the precise steps and the process for obtaining approval from the NDRC, including the timing and documents required, may vary from case to case.
Sufficiency of information
The Court specifically acknowledged that comments and concerns at the convening hearing were taken into account, with amendments applied to address the same.
The Court further dismissed complaints advanced on behalf of a creditor in respect of three matters, namely (1) the valuation of security and collaterals, (2) cashflow forecasts, and (3) progress of restructuring of debts not subject to the restructuring. The Court considered that sufficient information has been provided in the explanatory statement which adequately addressed any such concerns.
Class Composition
The Court examined the single class composition according to well-established principles, namely to look at the rights of creditors (as opposed to separate commercial or other interests) and that the Court should take a broad approach to avoid giving an unjustified veto to a particular minority group of creditors.
In the present case, the Court had reservations as to whether the rights of the lenders of the “Bank Loans” and those of the “Investors” are sufficiently similar for the purpose of conferring together at a single meeting. However, at the end, the Court was satisfied that it would not be in the interests of the creditors to decline sanction on this basis. In particular, the sophisticated lenders were aware of these differences prior to voting, and the voting results indicated that the Scheme would have been approved even if the lenders and investors had been placed into separate classes.
Relatedly, the Court agreed with the submission that neither fees paid pursuant to a creditors support agreement nor payment of certain advisor fees would fracture the class. The former was equally open to all creditors (and that the amount is relatively modest) whilst the latter were reimbursement for actual costs incurred which arose as a result of the complexity of the affairs of the Group and the period of negotiations, which in any event had been fully disclosed. Her Ladyship further addressed other issues none of which gave rise to any ‘class issue’.
The full judgment is available at:
https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=168246&currpage=T
