Hong Kong: To vote or not to vote - Clarity on the interpretation of Rule 2.10 of the Takeovers Code and the Constitution of Court Meetings for a Hong Kong Privatization Scheme of Arrangement

In brief

The Hong Kong court has delivered an important judgment on the interpretation of Rule 2.10 of the Takeovers Code and provided practical guidance on the types of court meeting that may be approved for privatisation of a Hong Kong incorporated company pursuant to a scheme of arrangement under the Companies Ordinance and the Takeovers Code. In view of the pandemic-related travel restrictions, the Court also directed a hybrid court meeting, allowing overseas shareholders to attend physically or online by way of electronic means. Parties which seek to use a scheme of arrangement to privatise a Hong Kong incorporated company should take heed of this decision when preparing the relevant documents.


Contents

Introduction 

  • On 23 September 2021, the High Court of Hong Kong ("Court") sanctioned the scheme of arrangement ("Scheme") for the privatisation of Chong Hing Bank Limited ("Company") by Yue Xiu Enterprises (Holdings) Limited ("Offeror"), by reason that the requirements under sections 673 and 674 of the Companies Ordinance (Cap. 622) (CO) and Rule 2.10 of The Code on Takeovers and Mergers ("Takeovers Code") were satisfied.1
  • This case provided useful guidance and clarification on the interpretation of Rule 2.10 of the Takeovers Code in privatising a Hong Kong incorporated company by way of a scheme of arrangement and the proper constitution of a meeting of the shareholders subject to a scheme of arrangement approving the same at the direction of the Court ("court meeting").
  • This case was also the first time in the context of a scheme of arrangement where the Court directed a hybrid form of a court meeting to allow overseas shareholders an option of attending and voting online through electronic means, ensure that they would not be deprived of the right to attend meetings because of the travel restrictions in Hong Kong due to the pandemic.

1 The reasons for judgment was handed down on 18 October 2021. Baker & McKenzie advised Chong Hing Bank Limited in this case.

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