Jersey Unreported Judgments

[2010]JRC115

royal court

(Samedi Division)

16^th June 2010

Before     :

M.C. St. J. Birt, Esq., Bailiff, and Jurats Clapham and Newcombe.

 

IN THE MATTER OF A REPRESENTATION BY CHINA REAL ESTATE OPPORTUNITIES PLC

AND IN THE MATTER OF ARTICLE 125 OF THE COMPANIES (JERSEY) LAW 1991

Advocate E. C. P. Mackereth appeared for the Representor.

judgment

the bailiff:

1.        This is an application by China Real Estate Opportunities Plc, under Article 125 of the Companies (Jersey) Law 1991, for approval of a scheme of arrangement.  The company is incorporated in Jersey and is a collective investment fund, pursuant to the Collective Investment Funds (Jersey) Law 1988.  The objective of the company is to achieve capital growth by investing in and developing a portfolio of properties in mainland China.  Day to day responsibility for management of the real estate assets of the company is delegated to the company's investment advisor and to its property manager, Treasury Holdings Shanghai Property Management Co.  These two companies are owned in equal proportions by Mr Richard Barrett and Mr John Ronan; Mr Barrett is a director of the company and between them Mr Barrett and Mr Ronan control 31.7% of the shares of the company. 

2.        The proposal is straightforward.  Under the scheme the company will become wholly owned by Treasury China Trust, which is a business trust constituted under the law of Singapore and is something which we would recognise as being a unit trust.  In return for that, the shareholders of the company will become holders of 100% of the units in Treasury China Trust on the basis of 5 units for every share in the company.  The property manager will remain the same, although there are to be adjustments to the method of calculation of its remuneration so as to align the performance fee more closely with the net-operating income.  The independent members of the board of the company have been advised independently in relation to what one might term as interested persons transactions and the Court is satisfied that full disclosure has been made in the scheme documentation.  It is also noted that these matters were dealt with in certain extraordinary general meetings held alongside the Court meeting and that on those matters the interested parties did not vote. 

3.        The objective of the scheme is to make the company more readily accessible to investors based in Asia thus broadening the base of potential investors, which in turn should benefit the rating and liquidity of shares in the company. 

4.        The test which the Court must apply in Article 125 applications is well established and was conveniently summarised recently in the case of Re Computer Patent Annuities [2010] JRC 011.  The test is three-fold; the Court must consider:-

(i)        whether the provisions of the 1991 Law have been complied with;

(ii)       whether the class of shareholders to be affected by the proposed scheme was fairly represented by those who attended the meeting and whether the statutory majority are acting bona fide and not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and

(iii)      whether the arrangement is such that an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. 

We therefore will take each of these matters in turn.

5.        As to the first we have received a number of affidavits explaining exactly what occurred in terms of the sending out of notices and the events at the Court-ordered meeting itself.  We are satisfied that the explanatory statement which accompanied the documents explained the matter fairly and properly; indeed the Court reviewed that document at the convening hearing on 14^th May and suggested certain additions, which were included.  In particular the Court is satisfied that the document did make full and proper disclosure of all matters where there might be an interest on the part of the owners of the property manager, and, as we say, we note that the independent directors have been separately advised on this aspect. 

6.        As to the second point there is only one class of shareholder.  Those shareholders represented at the meeting constituted 31.8% of the number of total shareholders and 58% of the total shares in issue.  At the meeting 100% of the votes cast were in favour of the scheme.  We are satisfied on the second aspect. 

7.        We are also satisfied that the arrangement is such that an intelligent and honest man might reasonably approve.  The substitution of units in a unit trust listed on the Singapore Stock Exchange for shares in the company may well assist, as the directors believe, in attracting investors from the Far East which will in turn benefit shareholders by increasing the size of the fund, possibly reducing the discount to net asset value and other matters.  These are clearly all matters on which shareholders could quite reasonably take the view that the scheme is likely to be beneficial to them.  We note also that the Jersey Financial Services Scheme has approved the scheme and no shareholder has appeared today to oppose the scheme. 

8.        In all the circumstances we give it our approval and we make an order in the terms of the draft produced to us by Mr Mackereth. 

Authorities

Companies (Jersey) Law 1991.

Collective Investment Funds (Jersey) Law 1988.

Re Computer Patent Annuities [2010] JRC 011.