TNAG-2478-FCO40-3608-Trade-relations-between-Hong-Kong--the-UK-and-other-countrie-1992 — Page 3

RESTRICTED

XCRI(92)22

Winding up

9

If there is to be a winding-up, the preferred procedure is that of members' voluntary winding-up, applicable to companies which are not insolvent. This is however not possible given the existence of the $1 million debt the company owes Government. On the other hand it would be regrettable were the company to be wound up under insolvency procedures, because of the adverse reflection on the directors and shareholders.

Suspension of Activities

10

In the circumstances, it would be prudent to suspend business at once so as not to incur further losses. However, the supply in Hong Kong of qualified manpower at the professional, technical, administrative and managerial level continues to be tight and there is a likelihood of an upturn in the demand for the company's services in the foreseeable future. It would therefore be prudent to keep the company in existence, albeit in an inactive state, so that it can be reactivated quickly if and when required.

11

At the company's Board of Directors' meeting on 25 June 1992, it was decided that the company should suspend its trading activities in Hong Kong and Toronto with effect from the end of July 1992.

Present Position

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With the agreement of Government for the company to defer repayment of the outstanding loan of $1 million indefinitely, the company is now in the process of settling its debts with its other creditors. In the meantime, steps are being taken to lay off all staff and to sort out the company's contractual obligations, if any, to its donors and signed up customers. The Board of Directors will also map out new procedures for monitoring the business climate with a view to resuming operation when the opportunity presents itself.

13

As two instalments of shareholders' contribution will be due from HKIPM in September 1992 and September 1993 respectively, the company will have at least a working capital of $250,000 a year for the next two years which is sufficient to sustain the company on a much reduced scale of operation. The situation will be assessed by the Board of Directors in or shortly before September 1994, and a final decision on the future of the company will be taken then.