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M&A Nuggets: “M & A” – What Does It Mean?

These nuggets are all about “M & A” – most people identify M & A with mergers and acquisitions.  However, did you know that the acronym M & A has many other meanings, all of which can be related to mergers and acquisitions.  For example:

  • Monitoring & Assessment – every purchaser of a business should continuously monitor and assess its target during the acquisition process to determine whether any material changes, good or bad, have occurred
  • Measurement & Analysis – purchasers must measure many different aspects of the target, most importantly the key performance indicators in the target’s industry, and conduct a thorough analysis of those measurements
  • Management & Administration – purchasers must conduct a review of the target’s key personnel to determine who is necessary to the operation of the business post-closing, who is not, and whether there are any gaps in management that need to be filled

So, as a purchaser, make sure that you devote time and resources to the other “M & As” related to the acquisition process.

Happy Holidays and New Year.

If you have any questions about this or any other M&A issue, please contact Glenn Solomon at gsolomon@offitkurman.com or 443-738-1522.

ONC Corporate Disputes and Insolvency Quarterly

Dear Clients and Friends,

This special newsletter aims to regularly update practitioners on important and noteworthy cases in the areas of corporate disputes and insolvency in Hong Kong, the UK and other common law countries. In this issue, we have highlighted:

·         5 Corporate Insolvency Cases

·         3 Cross-border Insolvency Cases

·         2 Restructuring Cases

·         3 Corporate Disputes Cases

·         6 Bankruptcy Cases

Our selection of cases and our analysis of them may not be exhaustive. Your comments and suggestions are always most welcome. Please feel free to contact me at ludwig.ng@onc.hk

Best regards,

Ludwig Ng

Partner, Solicitor Advocate

ONC Lawyers

HEADLINES OF THIS ISSUE

Corporate Insolvency Cases

1.        A contributory (as opposed to a creditor) petitioning for the winding-up of a company should normally show a “tangible interest” in the assets of the company or a ‘need for investigation’, which entitles him to ask for the winding up of the company

Haw Par Pharmaceutical Holdings Pte. Ltd v Hua Han Health Industry Holdings Ltd [2019] 4 HKLRD 286

2.        Relevant factors that Court will take into account in giving retrospective sanction

Re Moulin Global Eyecare Trading Ltd (in liquidation) [2019] 4 HKLRD 643

3.        The requisite intention to gift must be proved to establish transaction at undervalue on the basis of gift

Ho Man Kit v Sure Lead Ltd [2019] HKCFI 2914

4.         Petitioner ordered to pay costs on a common fund basis for failing to explain why a winding-up order was sought in the petition

Wong Wai Tung v Lam Chun Fung and Another [2019] HKCFI 3034

5.         Once privileged, always privileged – legal advice attaching to the documents subsisted notwithstanding the dissolution of the company

Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600

Cross-border Insolvency Cases

6.          Indonesian bankruptcy proceedings recognized in Singapore

Heince Tombak Simanjuntak and others v Paulus Tannos and others [2019] SGHC 216

7.         Limits of assistance – it is not open to the assisting court to appoint a different person as the foreign representative

Re Rooftop Group International Pte Ltd and another (Triumphant Gold Limited and another, non-parties) [2019] SGHC 280

8.         Hong Kong Court recognized and assisted Mainland liquidators for the first time

Re CEFC Shanghai International Group Limited [2020] HKCFI 167

Restructuring Cases

9.          English High Court held that a scheme of arrangement only affect the rights of the creditors of a scheme company in their capacity as creditors, not other rights they have, such as proprietary rights in property

Re Instant Cash Loans Limited [2019] EWHC 2795 (Ch)

10.      In considering whether a scheme of arrangement is propounded for a permissible purpose for the general benefit of the scheme creditors, the Court will take into account the rate of return to scheme creditors and the amount of the restructuring and liquidation expenses

Re Da Yu Financial Holdings Limited (formerly known as China Agrotech Holdings Ltd) (in liquidation) [2019] HKCFI 2531

Corporate Disputes Cases

11.      Assessing the value of his shares is a proper purpose for a shareholder to seek inspection of the company’s documents and accounts, particularly where a long-standing substantial shareholder is seeking to protect his economic interest as a shareholder

Selvaraj (Moorthy) v GMT Industrial Ltd [2019] 4 HKLRD 572

12.      Court of Appeal: those who alleged fraud should carry the burden of proof and the proper remedy for a forged transfer is to seek a rectification of the share register and the company is a necessary party to the claim

Ngan Pui Chi and Another v Bao Quan [2019] 4 HKLRD 135

13.      Singapore Court of Appeal: discount for lack of control would typically apply where the buyout of a minority shareholding was made pursuant to a consent order in the absence of any finding on the issue of minority oppression

Liew Kit Fah and others v Koh Keng Chew and others [2019] SGCA 78

Bankruptcy Cases

14.      An application for a non-commencement order under the Bankruptcy Ordinance (Cap 6) should be made inter-partes

Re Cai Sui Xin [2019] HKCFI 2547

15.      Bankruptcy petition dismissed as the creditor failed to do all that was reasonable for the purpose of bringing the statutory demand to the debtor’s attention and to cause personal service of the demand to be effected

Re Luo Xing Juan Angela [2019] HKCFI 2674

16.      To prove a debtor has carried on business in Hong Kong, it is not enough to show that a person is running his company’s business even though he is the sole beneficiary shareholder and in complete control. There must be some evidence of activities on the part of the debtor over and above those attributable to the company to show that the debtor has carried on business of his own

Re Chen Mei Huan also known as Liu Chen Mei Huan also known as Liu Mei Huan Chen [2019] HKCFI 3028

17.      Singapore High Court: an annulment of bankruptcy order is not conditional upon all debts being proven

Standard Chartered Bank, Singapore Branch v Chua Seng Kiat (Lim Peng Liang David Llewellyn, intervener) [2019] SGHC 240

18.      Court of Appeal warned against debtor’s opportunistic attempts to invoke the Lasmos approach in the future to stay winding-up/bankruptcy petition by invoking arbitration agreement

Sit Kwong Lam v Petrolimex Singapore Pte. Ltd [2019] HKCA 1220

19.      Trustees in Bankruptcy found not in breach of their duties to act with reasonable care and skill, as they had limited funding available to them at the timed

Lau Chun Ming v Deloitte Touche Tohmatsu (A Firm) [2019] HKCFI 2722

Megren Al-Shaalan Joins White & Case as a Partner

Global law firm White & Case LLP has boosted its Saudi practice capabilities with the addition of Megren Al-Shaalan as a partner.

“White & Case has long had a strong Saudi practice, and Megren’s arrival significantly enhances our capabilities in the Kingdom,” said White & Case partner Doug Peel, Head of the Middle East. “Megren has been deeply involved in the design and delivery of Saudi Arabia’s 2030 Vision initiatives, which are key to the Kingdom’s future development and transformation. His knowledge and experience will be a major asset to the Firm as we continue our work in the Kingdom.”

Al-Shaalan arrives from the Saudi Royal Court, where he was a Senior Legal Advisor. He advised a number of government offices and entities on prominent projects including NEOM, the Red Sea Project and Qiddiya, helping structure their legal frameworks and establish their legal departments. Al-Shaalan also provided legal counsel on the establishment of a number of other government entities and projects. He has significant experience in public policy and a variety of areas of law, including regulatory, governance, corporate transactions, finance and litigation.

Oliver Brettle, a member of White & Case’s global Executive Committee, said: “Investment in our Saudi practice is part of our strategic growth ambitions and the Middle East, including Saudi Arabia, is an important market for the Firm. The arrival of Megren, with his experience and strong reputation in Saudi Arabia, will not only add to our corporate capabilities in the Kingdom, but will support the further growth and development of our other key practices and industry groups there.”

White & Case practices in Saudi Arabia in cooperation with the Law Office of Megren M. Al-Shaalan.

Baker McKenzie Announces Record Global Revenues of $2.92 Billion

  • Revenues up 4.4% with growth in all regions

  • PPP up 3%

  • Major program to drive global digitization and optimal client service delivery

  • Leading the sector for our people through Diversity & Inclusion

Baker McKenzie, the leading global law firm, has announced record revenues for the fiscal year ended 30 June 2019 (FY19) of $2.92 billion. In terms of constant currency, Baker McKenzie’s revenues were up 4.4% compared to the previous year. In US dollar terms, the Firm’s reporting currency, this translates into growth of 1.2%, after the effect of adverse currency exchange.

Baker McKenzie remains the most geographically diverse global law firm and all of our regions recorded growth as follows: EMEA +5.2%, AP +2.1%, LA +9.0% and NA +4.0%

All of our key financial metrics improved over last year: revenue growth, net income, profit margin, Profits per Partner (PPP), Revenue per Partner and Profits per Lawyer. We are especially pleased to accomplish this amid a market with flat demand. PPP was up by 3% to $1.48 million in US dollars. Overall net income or profit rose by 2% to $1 billion. Over the last decade the Firm has grown by 40% in terms of revenue and 50% in terms of PPP, outperforming most of our competitors.

Among our standout markets, all with significant double-digit growth, include Bogota, Buenos Aires, London, Prague, Turkey and Warsaw.

Baker McKenzie Acting Chair Jaime Trujillo says, “Recording 4.4 percent growth in a market as challenging as this while maintaining our commitment to all of our offices and our full service offering is a good result. The investments the Firm continues to make in legal services, the centers of excellence we have opened in lower-cost locations, and more effective partnering with clients, supported by long-term investments in industry, practice and client programs have enabled us to show profitable growth.

“This is despite the distinct geopolitical head winds throughout the second half of the year, which prompted our clients to cancel or postpone projects. We are also one of the most geographically diverse professional services firms in the world, both one of our key strengths, and at times a challenge in markets impacted when the US dollar is so strong, as it was this past year.”

Global trends in private M&A 2020

We have recently produced a client presentation on global trends in private M&A. Our findings draw on an in-depth analysis of more than 1,250 private M&A deals that A&O has advised on globally over the last eight years, looking at deal dynamics, execution risks and deal terms. This has given us exceptional insight into global and regional trends in market practice.

Global trends in private MA graphic

Key themes for 2019 include:

  • Megadeals and strategic domestic transactions dominate
  • Auction activity and competition starting to cool
  • Private equity waiting for price expectations to align
  • Regulatory landscape and economic uncertainty influence deal terms
  • W&I insurance gains traction outside of private equity exits
  • Shift in dynamics as buyers reclaim some lost ground
  • Marked differences in developed, emerging and frontier market M&A

Please speak to your usual Allen & Overy contact if you would like to schedule a briefing on these trends.

HONG KONG HK

Baker McKenzie Elects Milton Cheng as Next Chair

Leading global law firm Baker McKenzie is proud to announce that following a vote of its partnership, Milton Cheng has been elected as the next Chair of the Firm.

Based in Hong Kong, Milton is the Managing Partner of the Hong Kong office and concurrently the Chief Executive overseeing Baker McKenzie’s offices and businesses across eight countries in the Asia Pacific region.

Milton has considerable experience in mergers and acquisitions, real estate investment trusts, financial services regulation, corporate finance and corporate restructurings. He regularly advises clients — including REIT and other asset managers, financial institutions, multinationals and Hong Kong-listed groups — on a wide range of acquisition, REIT, restructuring, regulatory and corporate finance matters.

A graduate of King’s College London, Milton became a partner of Baker McKenzie in 1999 and is admitted to practice in Hong Kong and in England & Wales. He is the Firm’s first Asian Chair.

Milton Cheng, Chair-elect of Baker McKenzie said, “I am truly honored by the trust my fellow partners have placed in me. I look forward to working with all of them and my colleagues across the world to build on the great work of my predecessors to make Baker McKenzie the global law firm of choice.”

Milton, who will serve in the role for four years, takes up the position with effect from October 17, 2019 succeeding Jaime Trujillo, who has been Acting Global Chair since October 2018.

Jaime said, “We had a group of outstanding candidates for our next Chair and the partners had a difficult decision to make. In choosing Milton we have someone who can take this great Firm to the next level. I offer him my sincerest congratulations.”

Still on Registration of Foreign Judgments in Nigeria

In Suit No. FHC/ABJ/CS/203/2019; Emmanuel Ekpenyong Esq. v. Attorney General and Minister of Justice of the Federation, the Federal High Court, Abuja Judicial Division by a Judgment dated 10th June 2019, held that the Plaintiff (“Emmanuel”) has not placed before the Court, evidence to show that the Defendant (“the Attorney General”) ought to be satisfied to promulgate an Order to bring Part I of the Foreign Judgment Reciprocal Enforcement Act, 1990 (“the 1990 Act”) into operation pursuant to Section 3 (1) of the 1990 Act which provides that;

“The Minister of Justice if he is satisfied that, in the event of the benefits conferred by this Part of this Act being extended to judgments given in superior courts for any foreign country, substantial reciprocity of treatment will be assured as respects the enforcement in that foreign country of judgments given in the superior courts in Nigeria, may by order, direct:

(a) That this Part of this Act shall extend to that foreign country; and
(b) That such courts of that foreign country as are specific in the order shall be deemed superior courts of that country for the purpose of this part of this Act..”

The Court further held that the phrase “the Minister of Justice if he is satisfied………..may by order direct…..” shows discretion on the part of the Attorney General. The Court found that though in some instances, the word “may” in a document may be interpreted to mean “shall”; the clear wordings of the 1990 Act suggests discretion on the part of the Attorney General on whether or not to promulgate the Order to bring Part I of the 1990 Act into operation.

By a Notice of Appeal dated 29th August 2019, Emmanuel appealed against the Judgment to the Court of Appeal, Abuja Judicial Division. Emmanuel contends that the provisions of Section 3 of the Reciprocal Enforcement of Judgment Ordinance, CAP. 175 1958 (“1958 the Ordinance”) and Section 9 of the United Kingdom’s Administration of Justice Act, 1920 codifies the substantial reciprocity treatment of Judgments of superior Courts of Nigeria on one hand and England, Ireland and the Court of Session in Scotland on the other hand. Section 9 of the 1990 Act codifies the substantial reciprocity treatment of Judgments of superior Courts in Nigeria and other commonwealth countries.

The legal standard of satisfaction required of the Attorney General by the phrase “The Minister of Justice if he is satisfied…” as used in Section 3 (1) of the 1990 Act ought not to be based on an indefinite, unhindered, incontestable and subjective discretion or prerogative of the Attorney General but ought to be based on a reasonable and objective premise of whether there are superior Courts of any foreign country with substantial reciprocity treatment of Judgments with Nigeria.

The common knowledge that superior Courts in England, Ireland, the Court of Session in Scotland and other commonwealth countries have substantial reciprocity treatment of Judgments with Nigerian superior Courts has fulfilled the objective legal standard for the Attorney General’s satisfaction and forms the legal basis upon which the Attorney General ought to have promulgated the Order to extend the application of Part I of the 1990 Act to the Judgments of superior Courts in England, Ireland, the Court of Session in Scotland and other commonwealth countries.

The failure of the Attorney General to promulgate the Order since 1990 when the Act was enacted has made Nigerian Courts to rely on the colonial and out dated 1958 Ordinance as well as its Rules of 1922 for registration of foreign judgments in Nigeria. This has made the process of registration of foreign Judgments in Nigeria to be uncertain and burdensome.

Emmanuel further contended that it is settled Nigerian law that “may” in a legal document may be construed as “shall” so that justice will not be a slave to grammar. Again, if interpreting “may” as used in a legal document as discretionary will result in serious general inconvenience to innocent persons of the public without furthering the object of the enactment; it shall be construed to be mandatory. Furthermore, the Court would interpret “may” as mandatory whenever it is used to impose a duty on a public functionary, the benefits which inures to a private citizen.

Since the failure of the Attorney General to promulgate the Order pursuant to Section 3 (1) of the Act to bring Part I of the Act into operation for the benefit of Nigerians has resulted in serious general inconvenience to innocent Nigerians, especially Emmanuel, without furthering the objectives of the Act, the justice of the case demands that the mischief rule of interpretation ought to be applied in the interpretation of “may” as used in the provision as “shall” so that justice will not be a slave to grammar.

UK’s approach to protecting and enforcing design rights

Global Head of IP David Stone speaks to Lexology Learn and discusses why protecting and enforcing design rights in the UK is becoming a lot more attractive, as well as new measures being introduced by the Intellectual Property Enterprise Court. He also looks at where there is room for improvement in the English courts.

Dutch Supreme Court orders cut in emissions by the end of 2020

The Netherlands Supreme Court on Friday ordered the government to reduce greenhouse gas emissions by 25 percent by the end of 2020. In their decision, the court noted that “every country is responsible for its part and can therefore be called to account for it.”

The Urgenda Foundation brought the suit on behalf of 886 Dutch citizens in 2013, claiming that the state is exposing its citizens to danger. The court agreed with the Urgenda Foundation and rested its decision on the UN Convention on Human Rights as well as the European Convention on Human Rights and the Netherlands’ affirmative obligation to protect the lives and well-being of its citizens.

“This obligation applies to all activities, public and non-public, that can jeopardize the rights protected in this way, and certainly applies to industrial activities that by their nature are dangerous.”

In order to fulfill the requirements of the ECHR, the government will need to increase the speed with which they are addressing climate change, “the EU itself has stated that it considers a 30% reduction in 2020 to be necessary.” It will be up to Dutch lawmakers to take appropriate measures to reduce emissions by the end of 2020.The

UK lawmakers vote in favor of EU withdrawal agreement

UK lawmakers voted in favor of the second reading of the EU Withdrawal Agreement on Friday, leading the nation one step closer to leave the EU by January 31.

Parliament voted 358 to 234, a majority of 124, in favor of the Brexit bill. While lawmakers have agreed to the bill in principle, it will now be debated further by both chambers of Parliament in January.

Since its last reading in October, changes to the bill have been seen as controversial. If passed, the new bill would outlaw any extension to the UK’s transition period, which ends on December 31, 2020. Labour Brexit spokesman Keir Starmer warned parliament that refusing any extension beyond 2020 is “reckless and ridiculous” as it puts the UK at risk of “a bare bones deal or no deal at all.”

Since passed, lawmakers will now have another three days to discuss it further, beginning on January 7. The final vote will take place on January 9, and, if approved, the bill will be passed to the UK’s upper house to make a final decision on whether the bill becomes law.