LIANG RONALD AND OTHERS v. LWK CONSERVATION LTD

HCMP 2464/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2464 OF 2013

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J U D G M E N T

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1. This is an application by the directors of LWK Conservation Ltd (“Company”) to rectify the non-compliances of sections 122(1), (1A) and (2) of the Companies Ordinance, Cap 32 (“Ordinance”) in respect of the laying of the Company’s profit and loss accounts and balance sheets at its annual general meetings (“AGM”).  The Company is absent today.

2. The Company was incorporated in Hong Kong on 12 June 2006.  However, its business operation only commenced in 2011, with the exception that in 2010 it had hired a contractor to source for business.  The Company is in the business of providing comprehensive architectural service in Hong Kong and the Mainland. 

3. The infringements in question (“Infringements”) were discovered recently in the course of a due diligence exercise carried out for the purpose of a proposed listing of C Cheng Holdings Ltd (“Holdings”), a company incorporated in the Cayman Islands, on the Growth Enterprises Market of The Stock Exchange of Hong Kong Ltd.  Pursuant to a reorganisation for the purpose of the listing, the Company has become one of the Holdings’ six subsidiaries. 

4. The Infringements cover the period from the incorporation of the Company to the financial year ended 31 December 2011. 

5. As to the reason for the Infringements, the evidence before the court is that due to the dormant nature of the Company in its early years it was not required by the Inland Revenue Department to pay any tax.  In those circumstances, the sole director of the Company at the time, Ms Chung, overlooked the requirements for preparing the financial statements of the Company and to have them laid at the Company’s AGM.  For similar reason, the applicants, who replaced Ms Chung as directors on 27 September 2010, have made the same mistake. 

6. The applicants have endeavoured to remedy the Infringements by having the financial statements of the Company for the years ended 31 December 2006 to 31 December 2011 prepared and laid before an EGM of the Company held on 5 September 2013.  All the financial statements were duly approved at that EGM. 

7. Further, the evidence before the court demonstrates that at all material times the shareholders of the Company were aware of its finance and therefore have suffered no prejudice as a result of the Infringements.

8. The applicable principles of law are trite.  This court has a wide discretion in granting relief pursuant to sections 122(1B) (a) and (b) to allow the Infringements to be remedied.  The key considerations are (a) whether the shareholders were aware of the financial position of the Company and thus were not prejudiced by the Infringements; (b) whether the default was inadvertent; and (c) whether the court is satisfied that the Company will comply with its obligations under section 122 in the future. 

9. I am satisfied that the first two requirements have been met. 

10. There is evidence before this court that the Company will put in place a number of measures to improve its corporate governance and to ensure that there will be no further breach of section 122.  In particular, the directors of the Company and other senior members of management will be given instructions by the legal advisors of Holdings on, inter alia, the various duties under the Ordinance.  I believe that such training is the best assurance against future infringement. 

11. In these premises, I accept the undertaking (as amended) stated in the draft order and grant the order stated therein with amendments.