Jones J
1 IN THE GRAND C 2 FINANCIAL SERV 3 4 5 The Honourable M 6 In Open Court, 21st 7 8 IN THE MATTER JUSTICE ANDREW J. JONES QC December 2012 CAUSE NO. OF THE COMPANIES LAW FSD 168 OF 2012 10 AND IN THE MATI 11 12 Appearances: Mr 13 14 15 16 Introduction 17 1. A creditor's Limited (the 18 "Petitioner"). 19 unable to pay 20 a debtor of ORCHID DEVELOPMENTS GROUP LTD. Nicholas Fox of Mourant Ozannes for the Petitioner RULING winning up petition was presented against Orchid Ltd ("Company") on 13th December 2012 by Bellip. The evidence before the Court is that the Company is its current operating expenses as they fall due, but solely for the purpose of this MITED document, it is clear that the value 21 of its assets is 22 less than its liabilities and petition will be 23 Petitioner has 24 of the petition. 25 26 Factual Background 27 2. The Company 28 Alternative In suspended sin 29 on business, 30 commercial a 31 accords the amount of its liabilities by taking place on 25th January 2013. By its summons date, applies for the appointment of provisional liquidation. 1 It was incorporated on 2nd June 2004 and its share investment Market of the London Stock Exchange, also be 24 September 2012. Together with its subsidiaries, mainly in Bulgaria, as the owner-manager and residential property developments. The group's th 1 of 5 forth, he that of the pending the hearing 6 7 are listed on the 8 high trading has been the Company carries 9 developer of various ee main projects are
1 the Grand Mall 2 complex and 3 Company and 4 services agree 5 Meyohas and 6 shall adopt the 7 and delivered 8 Messrs Meyoha 9 Concert Party 10 support of the 11 in his capacity retail and residential are in Varna. The it to a management led by Messrs Guy executive Officers. I the stock exchange (“stock”) and refer to Concert Party”. The also give evidence in front by Mr Meyohas 13 3. A detailed ana- 14 is contained in 15 mean the €20 16 associated con- of the Novem- 17 18 million (2011: 19 non-current as 20 net realizable 21 million (2011: 22 of credit facil- 23 net loss for the 24 €2,060,000 ap- 25 half year ended 26 Grand Mall at 27 project. In spite 28 Meyohas’s evi- 29 to my analysis of the Company’s consolidated financial position, Part II of the November Circular. I shall use the expan- sion in which it holds a 30% interest, details of which are set out Circular. In brief summary, the Company’s net (€75.3m) which equates to an NAV per share of €0.74 sales (at fair value) are €167.2 million (2011: €166.9m). Long term (€102.6m). Long term borrowing liabilities of €15.3 m. six months ended 30th June 2012 was €3,029,000 (2011: €3.0m) consists mainly of ten year and full year loss of €182,000). The Group’s revenue over the preceding six months of the sale of completed apartments is that it is insolvent on a cash flow test if due dates is that it is insolvent on a cash flow test if due dates session the “Group” to 30th June 2012, subsidiaries and an asset value is €71.4 €0.61). The Group’s liabilities are €103.4 and current assets (at million consist mainly
The Group’s 1st half year profit of €5.9 million for the is generated from the its Orchid Hills inflow of Orchid Hills alliance sheet test, Mr it is presently unable any is unable to pay 30 €216,864 owing 31 August, Sept- 32 Petitioner will 33 that the Compa- 34 which will far 35 Company is a 36 meet these im- 37 38 4. Trading in the 39 determined the 40 30th June 2012. fee for the months of he fees owed to the Meyohas’ evidence is of about €132,000 not explain why the facilities in order to because its directors r the half year ended meet its short term
1 financing requ- 2 Company's dis- 3 £2,114,240 (at 4 £671,621 (£83 5 by the issue of 6 committed to 7 directors expre- 8 with the capital 9 requirements it 10 beyond. The 11 resolutions we 12 fees would not incentivize (and avoid the need for a going concern) announced a rights issue by which they proposed a about £2,65m) of new share capital. They also propose £28) of unpaid management fees for the period up to 29,849,813 new shares to the Petitioner, Messrs Meyer invest a minimum £1.36 million (£1.7m) as part of passed the view that this minimum subscription of £1.36 million of fees, would be sufficient to meet the Group's period from 1st December 2012 until 30th November Circular emphasized to shareholders that not passed at the EGM, this minimum subscription with the result that the Company would in qualification) the posed to raise up to posed to capitalize 31st December 2012 yohas and Miretzky these proposals. The 36 million, coupled imp's working capital at 1st the proposed and capitalization of not have sufficient 13 working capital 14 placed into his 15 shareholders' 16 explain why 17 significant dilem- 18 all those other 19 Party's minima- 20 39.34% and it 21 event, the win- 22 held, presumat- 23 the EGM and 24 duly announc- 25 time. It is aga- 26 Party) seeks a 27 notice of the approximately 28 70,000 of its all to continue to trade, would cease for trading and will not in spite of this warning, the proposal was rejected, but I note that it would be in contradiction of the equity interest of the independent shareholder (the Concert Party). If the proposals had been than the Concert Party). If the proposals had been an interest in the Company's share capital would have been uninterestingly possible for its interest to be increased, then the in interest in the Company's share capital would have been an interesting up petition was presented on the day before the only in the knowledge that the resolutions were bound ly in the knowledge that the resolutions were bound that a winding up petition had been presented at to the London Stock Exchange on 14th December 2012. This is the factual background that the Petitioner (or its agent) for the appointment of provisional liquidators (£15 million) and the Company's independent shareholders (estimated share capital) was rejected by the as has not sought to day (by which I mean passed, the Concert issued from 29.97% to ed to 63.84%). In the EGM was due to be to fail. The result of to 5.44pm London realizing that having given appcar to be owed alders (who still own 30 31 5. Prior to the en- 32 broad disen- 33 tended to be 34 appointment of 35 would be diffi- 36 of an official 37 what is now spe- 38 and very speci- 39 application of 40 only if it is ne-
1 assets or (ii) 2 misconduct or 3 misconduct on 4 not suggesting 5 or 25th January 6 Mr Meyohas's regulatory fee, 7 million by the the oppression of minority shareholders or (ii) the part of the Company's directors, that is to say, the part of Messrs Meyohas and Miretzky themselves, that they will act in breach of duty between now and the 2013 unless provisional liquidators are appointed. In 2013 seeks to put the Petitioner's case as follows - I said above, the Company has no money to pay propyees, nor will it be able to pay its other pro- Bellport is presently owed or will shortly be owed a Company. That debt will increase monthly because mismanagement or Obviously, they are e trial of the petition his second affidavit, fund its day to day the affaries of the sion advisers and approximately Euro 2 se the Management 13 Services Agreed under no obli- 14 15 16 22. In the eff- 17 to the Company 18 intention to ne Bellport to pre- 19 the basis that I 20 21 Bearing in mind 22 liabilities and 23 Party owns 26 justification for 24 nominate the 25 such funding 26 to the Group 27 second Consentment between Bellport and the Company continues to 28 ratify, contradictual or otherwise, to fund the Company's circumstances. Bellport is not prepared to provide further without the appointment of Provisional Liquidators. I by agreement with the Provisional indicate an immediate agreement with the Provisional wide additional funding to assist the Company in concluding such funding is not considered as an unsecured debt in that the amount owed to the Petitioner is less than 25. and that the Company has an NAV of about €71.4 million, at that time. I do not find Mr Meyohas's analysis at all con-
I do not find Mr Meyohas's analysis at all con- a provisional winding up order so that the creditors and safely enter into a funding arrangement which is not considered as an unsecured debt in the liquidation of independent creditors and the Company's independent representation that no agreement has been concluded opera- tive operations. Bellport is gratuitous funding It will be Bellport's Liquidators to allow ting to trade, but on the Liquidation." of the Group's total of which the Concert financing. I can see no e Concert Party can at all, if the basis that dent shareholders. I with the nominated 30 provisional li- 31 authorize any 32 shareholders to 33 34 6. The second ar- 35 position in wi- 36 their duties as 37 permit the Co- 38 these directors. 39 de; but I would not less the independent s's second affidavit, (a Party) conflict with ion 104(2) does not in the application of at month
1 7. In my judgment met with the re- 3 4 DATED this 2/1st day 5 6 9 10 11 The Honourable Mr.
JUDGE OF THE G
HONOURABLE MR. of December 2012 Justice Andrew J. Jones QC 2 AND COURT Law have not been 5 of 5