NG WING HONG v. MODERN AUTOMOBILE COMPANY LTD

HCMP 3378/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3378 OF 2013

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D E C I S I O N

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1. I have before me Originating Summonses issued by seven companies. In respect of each of those companies, applications are made under section 122 of the Companies Ordinance for an extension of the period within which the companies were required to put their audited financial statements before the company in annual general meeting. In addition, in the case of three of the companies, applications are also made in respect of one year each for an extension of the period in which an annual general meeting had to be convened, pursuant to section 111 of the Companies Ordinance.

2. The breaches are all benign. Principally, they arise from the fact that the annual general meetings were not held within the nine-month period after the end of the relevant accounting period in respect of which audited financial statements had been prepared as required by section 122.  The delays varied from one to, on a couple of occasions, three months.

3. I accept on the evidence before me that the breaches of section 122 were inadvertent and I am prepared to grant orders.

4. The only issue which has arisen in this case which has required much consideration is the precise form of the order, the reason is as follows:

(1) As is normally the case, currently the catalyst for the applications is the listing of a company which would be the holding company of the seven applicants on the Main Board of the Stock Exchange of Hong Kong Limited.

(2) The application was put initially on the basis that extensions were required, both to cure breaches of sections 122 and 111 in order to ensure that the listing was not jeopardised. 

(3) It was also said that the directors of the company wanted to cure the breaches in order to remove the risk of prosecution and to put the affairs of the company in good order.

5. Mr Yeung, who appeared on behalf of the applicants, drew to my attention a section of which I had not previously been made aware, namely section 351A of the Companies Ordinance, Cap 32 (it is repeated in materially the same terms in section 900 of the new Companies Ordinance, Cap 622).  Section 351A provides:

“(1) Notwithstanding section 26 of the Magistrates Ordinance (Cap 227), an information or complaint relating to an offence under this Ordinance may be tried if it is laid or made, as the case may be, at any time within 3 years after the commission of the offence and within 12 months after the date on which evidence sufficient in the opinion of the Secretary for Justice to justify the proceedings comes to his knowledge.

(2) For the purposes of this section, a certificate of the Secretary for Justice as to the date on which evidence sufficient to justify proceedings came to his knowledge shall be conclusive evidence.”

6. The import of this subsection is clear. There is no risk of a company being prosecuted for a breach of either section 122 or section 111 once three years has expired since the date by which it should have taken whatever steps under those two sections are relevant.

7. As I have explained in recent judgments, it is now clear that there is no realistic prospect of the prospective listing of a company on the Main Board of the Stock Exchange being jeopardised by breaches of sections 111 and 122.  That being the case, the only real reason for making an application of this sort can now be to cure breaches which have occurred in the last three years. 

8. In my view, normally only applications in respect of breaches in respect of which there is still a risk of prosecution should be granted.  In other cases the applications will be academic and normally there will be no justification for the court exercising its jurisdiction.  This is relevant in the present case because the three applications under section 111 all go back before the three-year period, and one of them goes back as far as 1995, and in my view, in respect of those applications it would not be appropriate to grant orders.

9. In respect of the applications under section 122, I will grant orders in respect of the breaches which do not pre-date the limitation period referred to in section 351A(1).