In another development in the tussle betwen Rex International and a Malaysia-listed company, the High Court of the Isle of Man on 30 June (2016) ordered the immediate winding up of Lime Petroleum.
Lime is 65% owned, indirectly, by Singapore-listed Rex International while the remaining 35% by Malaysia-listed Hibiscus Petroleum's subsidiary, Gulf Hibiscus.
The legal advisors of Lime had filed the application to the court to wind up Lime on 5 March 2016, in accordance to a resolution passed at a meeting of the board of directors of Lime held on 8 March 2016, by a majority vote of 3:1.
The Lime Shareholders’ Agreement expressly provides for a board decision to be taken with simple majority in a situation of financial distress.
Liquidators will be duly appointed to handle payments to Lime’s creditors.
The liquidation of Lime will not have any material impact on Rex International for FY2016, given that the Group’s carrying amount of interest in Lime is nil.
“The Company reiterates that it has always been confident that the Lime Directors have at all times acted consistently with their duties to Lime and is pleased that the Lime Directors have once again been fully vindicated by this latest judgment on the application to wind up Lime.”
-- Dan Brostrom, executive chairman, Rex International
However, Hibiscus in its financial statements for the quarter ended 31 March 2016 had put its carrying value of its investment in Lime at RM212 million (about USD 53.0 million).
It follows that Hibiscus needs to make a huge writedown of that value.
Rex said it does not expect at this stage for the winding-up to generate any surplus whatsoever to be distributed to any shareholder of Lime.
In a judgment on 31 May 2016, His Honour, the Deemster Doyle had dismissed Gulf Hibiscus’ application to bring a derivative claim on behalf of Lime, against the Lime Directors.
He concluded the judgment by stating that he was minded to make an order for Gulf to pay for the costs of its failed application and that he would make his final determination after receiving additional submissions, if any.
For more, see REX INTERNATIONAL: Tastes victory in first of three legal cases