Zhitong Financial APP News, Gudou Holdings (08308) announced that on July 30, 2021, the company's indirect wholly-owned subsidiaries Guangdong Gudou and Guangdong Gudou Hotel Management and target company Yangjiang Sega Real Estate Development and original shareholders (3 individuals who held a total of 100% of the target company before capital increase and 49% of the target company immediately before the capital reduction) entered into a capital reduction agreement. It is reported that the target company is 51% owned by Guangdong Gudou, which is a group associated company.
In accordance with the Capital reduction Agreement, the parties have agreed to terminate the Capital increase Agreement and the rights and responsibilities of the parties immediately after the execution of the Capital reduction Agreement; Guangdong Gudou will withdraw from the Target Company through capital reduction; and the Target Company will pay 24.15 million RMB and interest to Guangdong Gudou.
As part of the equity reduction, the registered capital of the target company will be reduced from 2.2449 million yuan to 1.1 million yuan. After the reduction in equity, all shares in the target company will be held by the original shareholders, while the group will no longer directly or indirectly hold any shares in the target company. Therefore, the target company will no longer be an associate of the company.
Up to the date of execution of the equity reduction agreement, the Group has injected a total of RMB 24.15 million into the target company in accordance with the capital increase agreement. In accordance with the provisions of the Capital increase Agreement, the Group is expected to inject a further capital of RMB 41.02 million into the Target Company upon completion of the prerequisites set out in the Capital increase Agreement, that is, obtaining a construction permit for the land. As of the date of announcement, these conditions have not been met. Taking into account that the land development plan of the Target Company has not been carried out as expected by the Group, and that the Target Company has agreed to pay principal and interest to the Group in accordance with the capital reduction agreement, the Directors are of the view that the conclusion of the capital reduction agreement will enable the Group to realize its investment in the target company, thereby using the net proceeds of the capital reduction as the general working capital of the Group.
The Group is expected to recognize in its consolidated income statement the income arising from the equity reduction of approximately HK $4 million and the net proceeds from the equity reduction will be used as the general working capital of the Group.