Jersey Unreported Judgments

Companies - just and equitable winding up of Bellzone Mining Plc.

[2019]JRC009

Royal Court

(Samedi)

31 January 2019

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Crill and Thomas.

IN THE MATTER OF THE REPRESENTATION OF BELLZONE MINING PLC, ANTONY GARDNER-HILLMAN AND SIMON BRICKLES

AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991

Advocate J. D. Garrood for the Representors.

judgment

the commissioner:

1.        On 13^th December, 2018, the Court ordered the just and equitable winding up of Bellzone Mining Plc ("the Company"), pursuant to Article 155 of the Companies (Jersey) Law 1991 ("the Companies Law").  The application was brought by the Company and two of its directors, Mr Antony Gardner-Hillman and Mr Simon Brickles and supported by an affidavit by Mr Gardner-Hillman. 

Relevant Factual Background

2.        The Company is engaged in the exploitation of mining concessions in Guinea, initially iron ore, but more recently, ferronickel.  The Company was well funded but was severely impacted by the collapse in world steel prices after the 2008 global financial crisis, and then was impacted a second time by the Ebola epidemic in Guinea in 2013-2015. 

3.        The Company is a public limited company, incorporated in Jersey, whose shares were publicly traded on the AIM Market until they were suspended at the request of the Company on 3^rd December, 2018. 

4.        The Company was dependent on capital provided by its largest shareholder, China Sonangol pte (S) Limited ("CS Singapore") and later, Hudson Global Group Limited ("Hudson"), both being wholly owned subsidiaries of China Sonangol International Limited ("CS International"). 

5.        The principal debt is a partially secured debt owed to CS Singapore and Hudson, in the sum of US$18 million.  There are relatively modest trade creditors of US$ 86k rising by a further US $23k on termination.  

6.        The Company's assets comprise shares in subsidiaries, ultimately being Bellzone Mining SA and Bellzone Holdings s.a.r.l., both incorporated in Guinea.  They hold assets of varying degrees of liquidity, being:-

(i)        Movable mining and associated equipment valued at US$500k and likely to depreciate further in 2019;

(ii)       The site and buildings at Konta Port, a newly constructed port in Guinea; and

(iii)      Mining licences for iron ore and ferronickel production granted by the government of Guinea.

The Company and its subsidiaries employ 108 staff.

7.        The Company is irretrievably insolvent following CS Singapore and Hudson confirming that no further funding will be forthcoming.  On 3^rd December, 2018, Mr Canice Chan, a legal adviser to CS International, said this in an e-mail to Mr Gardner-Hillman:-

"We have held meetings over the future of Bellzone, and felt that there is no justifiable case to keep funding Bellzone.  If that means liquidation, so be it.  We, as Bellzone's creditor, await the liquidator's notification, and see what we can salvage out of the liquidation process."

8.        The existing lending agreements and the position adopted by CS International mean that the Company cannot raise third party funding.  In the circumstances the Company cannot now avoid an insolvent winding up or bankruptcy process. 

The Law

9.        Article 155 of the Companies Law provides that the Court may wind up a company if it is just and equitable to do so:

"Power for court to wind up

(1)       A company, not being a company in respect of which a declaration has been made (and not recalled) under the Désastre Law, may be wound up by the court if the court is of the opinion that -

(a)        It is just and equitable to do so; or

(b)        It is expedient in the public interest to do so.

(2)       ...

(3)       ...

(4)       If the court orders a company to be wound up under this Article it may -

(a)        Appoint a liquidator;

(b)        Direct the manner in which the winding up is to be conducted; and

(c)        Make such orders as it sees fit to ensure that the winding up is conducted in an orderly manner.."

10.      The Court has considered the breadth of this jurisdiction in the case of In the matter of Leveraged Income Fund Limited [2002] JLR 209 where Sir Michael Birt, then Deputy Bailiff, noted:-

"Article 155 is based upon a similar provision of the Companies Act of the United Kingdom. English authorities are therefore of assistance.  Although the English Courts have developed certain categories of cases where the Court will exercise its power under the just and equitable jurisdiction the Court is not confined to such categories.  The words 'just and equitable' are general words. As Palmer's Company Law Vol. 3 para 15.219 puts it:

'It has sometimes been suggested that there is an exhaustive list of situations that may fall within the scope of the 'just and equitable' clause, but it now seems that although such classification may be convenient for purposes of presentation, the words 'just and equitable' require a more flexible interpretation.  In the words of Lord Wilberforce:- 'Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances.'"

11.      The jurisdiction of the Court to order a winding up under Article 155 is therefore a wide one and the Court has made orders under Article 155 for a variety of reasons.  In the representation of Poundworld Limited [2009] JRC 042, Sir Michael Birt, then Deputy Bailiff, expressed caution in relation to the winding up of an insolvent company in the ordinary case:-

 "15    We are of the view that the Court should be cautious before ordering a winding up under Article 155 in the ordinary case of an insolvent company.  The Law provides for the appropriate procedure and this is the one which should normally be followed.  However, as referred to earlier, the Court's jurisdiction to order a winding up under Article 155 is a wide one and we are persuaded that, in the particular circumstances of this case, it would be right to exercise that jurisdiction."

12.      However, a winding up was ordered in that case because of a need to proceed expeditiously:-

"16 We are satisfied that the best interests of the creditors would undoubtedly be served by Poundworld being able to sell its remaining stock at retail value from its outlets by means of the Company continuing to trade for the limited period necessary to achieve this.  Conversely, if the stock were to be sold at wholesale values, the recovery for creditors, other than the landlords and the shipper, would be minimal.  We are also satisfied that if the Court does not order an immediate winding up, there is a substantial risk that the shipper and/'or the landlords will exercise their rights prior to the shareholders' and creditors' meetings required for a creditors' winding up and this would be to the prejudice of the creditors as a body.  Delay in the commencement of a liquidation until 16th February would therefore be damaging to the creditors."

13.      In the case of In re Anthony Investments [Esplanade] Limited [2013] JRC 217A the Court ordered the winding up of three connected companies, all of which were insolvent.  In the case of The Representation of Pringle and Others [2017] JRC 178, which concerned an insolvent company, the Royal Court reviewed the authorities relating to the application of Article 155 and inter alia, noted the guidance in Horizon Investments (Jersey) Limited [2012] JRC 039 being in particular:-

(i)        The existence of a public interest factor in the orderly administration of the company's affairs;

(ii)       The value to stakeholders for the liquidation process to be overseen by a liquidator as an officer of the Court; and

(iii)      The importance of the flexibility allowed for in the process and the liquidator's duty to the Court.

14.      In considering in Pringle whether the company may apply to declare itself "en désastre", the Court found that "the Viscount would have been in no better position to deal with the winding up than professional liquidators appointed by the Court."

Decision

15.      A creditors' winding up under chapter 4 of the Companies Law requires a minimum of 14 days' notice to be given to the creditors of a meeting at which it would be proposed to pass a special resolution for the company to be wound up (Article 160(1)(a) of the Companies Law). CS International ultimately owns 51.58% of the shares in the Company, as well as being an ultimate major creditor, and in the light of its declared approach, it was the view of the directors that such a special resolution would not be passed.  

16.      The concern of the directors was that any delay in the winding up process commencing would put the assets of the Company in jeopardy.  Those assets include movable parts and machinery situated in Guinea, some of which are in the possession of creditors.  There was a real risk of theft if security provisions were not maintained.  The directors were also concerned about the impact of any delay on the employees and on the value of the mining licences. 

17.      The proposed liquidators were Mr Alan Roberts and Mr Ben Rhodes of Grant Thornton LLP, and their appointment had the benefit of Grant Thornton having an office in Guinea, ready to act immediately to place the local companies into insolvency processes there.  Grant Thornton were therefore in a good position to deal with the matter expeditiously.  If a désastre was declared then, leaving aside delay, the Viscount would have to appoint Grant Thornton or alternative professional advisers both in Jersey and in Guinea, thus adding a further and unnecessary level of oversight and cost. 

18.      In the view of the Court, this was a clear case where its jurisdiction under Article 155 of the Companies Law should be invoked, a jurisdiction which has the advantage of being a speedy process in a case of where expedition was necessary.  The proposed liquidators were able to act immediately, both here and in Guinea, to secure the position in the interests of all of the stakeholders.  The Court was conscious, in particular, that this was a publicly quoted company with a large number of employees and a majority shareholder/creditor unwilling to take a proactive role. 

19.      The Court therefore granted the application to wind up the Company and appointed Mr Roberts and Mr Rhodes as joint liquidators, giving them the usual powers. 

Authorities

Companies (Jersey) Law 1991.

Re Leveraged Income Fund Limited   [2002] JLR 209

Representation of Poundworld [2009] JRC 042

Representation of Anthony Investments [Esplanade] Limited and Others [2013] JRC 217A

The Representation of Pringle and Others [2017] JRC 178

Horizon Investments (Jersey) Limited [2012] JRC 039