A response from HKSCC indicates that Glorious Property (0845) has some explaining to do: the Grand Court did indeed want to see the CCASS Participant figures. We also show that the 61 registered holders who voted against could not have held more than 0.89% of the shares which voted, and HKSCCN held at least 99.11%. The Grand Court should decide whether the scheme proceeds.

Glorious update
22 January 2014

An update on our story, Glorious failure in the Cayman Islands (19-Jan-2014) regarding the proposed privatisation of Glorious Property Holdings Ltd (Glorious, 0845). On Monday 21-Jan-2014 we asked Hong Kong Securities Clearing Co Ltd (HKSCC) why they had put out a circular on 7-Jan-2014 stating:

"the number of votes cast [by HKSCCN] in favour of the Scheme and the number of CCASS Participants on whose instructions they are cast and the number of votes cast [by HKSCCN] against the Scheme and the number of CCASS Participants on whose instructions they are cast will be disclosed to the Grand Court and may be taken into account in deciding whether or not the Grand Court should exercise its discretion to sanction the Scheme" (our underline)

Well, they had good reason to. Derrick P Y Fung, Head of Clearing at HKSCC, responded on 22-Jan-2014:

"The statement in the circular was made based on the company's request (through its share registrar) to HKSCC to provide the information in accordance with the Grand Court of Cayman Island's court order which provided that HKSCC shall "specify the number of votes cast in favour of the Scheme and the number of Participants on whose instructions they are cast and the number of votes cast against the proposed Scheme and the number of Participants on whose instructions they are cast". However, the company itself didn't include such a statement in its own announcement." (our bold)

We have been unable to obtain a copy of the Grand Court's order, and it was not on display during the offer period, but we will take HKSCC's word for it. Now given that the Grand Court instructed that it should be told the numbers of CCASS Participants who, via HKSCCN, voted for and against the privatisation, then apparently the Grand Court wanted to be able (but not necessarily obligated) to take that information into account before deciding whether or not the statutory "majority in numbers" had been satisfied. It presumably had regard to Practice Direction 2 of 2010 (PD2/2010), paragraph 4.4 under "Looking through the register".

So that leaves us with the obvious question: why did Glorious throw in the towel and declare that the privatisation had failed, rather than go to the Grand Court and ask it to make that decision, and by failing to follow the Grand Court's instruction to provide this information, was it in contempt of court? Is it open to a company not to follow the court's instructions, just because the majority of registered shareholders has voted against, when it is plain that, if the CCASS Participant figures are included, then the majority voted in favour?

Paragraph 2.3 of PD2/2010 requires that:

"Within seven days after the Court meeting(s) has or have been held, the applicant must file an affidavit sworn by the Chairman of the meeting(s) verifying that...the meeting(s) was or were duly held; and giving particulars of the result. In the event that the scheme was not approved, the applicant will also formally ask for the petition to be dismissed..."

Surely "the particulars of the result" should include the numbers of members and the number of CCASS Participants voting for and against, and the Court would then decide whether or not the majority in number has been satisfied, in all the circumstances, including the facts that:

  1. 96.92% of the shares voted (mostly by HKSCCN) were in favour, far more than the 75% statutory requirement; and
  2. that the number of shares not in CCASS on 17-Jan-2014 was only 0.18% of the company, so HKSCCN was the registered shareholder of 99.82% of all the issued shares. So the 61 shareholders (excluding HKSCCN) who voted against the scheme could not have held more than 0.18% of the issued shares, which is 0.55% of the Scheme Shares and equivalent to 0.89% of the shares which voted. That is, HKSCCN held at least 99.11% of the shares which were voted.

The Grand Court should decide whether to exercise its discretion to count the CCASS Participants into the total, and if it does, then the vote succeeds. Finally, the Grand Court should have the discretion on whether or not to dismiss the petition. If it does not, then the scheme should proceed.

HEC

By the way, looking at the CCASS positions, we note that on 30-Jul-2013, exactly 1.5 billion shares (19.25%) of Glorious moved from CCB International Securities Ltd to HEC Securities Ltd, formerly known as Chung Nam Securities Ltd, which has featured on Webb-site many times. The shares remain at HEC. Given that nobody else has a stake that large, could it be that Mr Zhang Zhi Rong is a client of, and possibly a margin client of, HEC?

© Webb-site.com, 2014

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