NAGY AKRAM EL-AZAR AND OTHERS v. WELLKO INDUSTRIAL LTD.

HCMP 5791/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 5791 OF 2000

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D E C I S I O N

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1. I have before me two related applications. They are both in relation to a company called Wellko Industrial Limited ("the Company").

2. There are two shareholders in Wellko Industrial Limited, being Milibow Assets Limited and Dooyang Hong Kong Limited. The two applications are as follows.

3. Under MP 5793 of 2000, Milibow, as a shareholder of the Company, seeks an order that the general meetings of the Company for the years 1999 and 2000 be called pursuant to Section 111(2) of the Companies Ordinance. In MP 5791 of 2000, the directors of the Company seek an order that there be an extension of time for them to lay before the Company in general meeting the relevant accounts of the Company, including a profit and loss account for the periods from 1 January 1998 to 31 December 1998, and from 1 January 1999 to 31 December 1999.

4. In relation to both applications, I have before me affirmations filed on behalf of Milibow and the directors. According to these affirmations, it would appear that the last AGM of the company was on 13 May 1998. Accordingly, under Section 111(1) the deadline for the following AGM of the Company would have been 12 August 1999, being 15 months from the date of the last AGM.

5. However, in March 1999, an event took place. It would appear that Milibow sought to exercise an option to buy Dooyang's shares. Dooyang is disputing the basis of the valuation on which Milibow sought to exercise its option to buy its shares. This dispute had led to the institution of proceedings in HCA No. 3810/00 in April 2000.

6. After the dispute began in March 1999, it would appear that the directors took the view that the AGM could not be called because of the dispute between the two shareholders. For the same reason, it would appear the directors have not laid before the meeting the relevant accounts.

7. I have also before me an affirmation of a solicitor, Miss Mimi Chu, who has exhibited to her affirmation, a draft affirmation of Mr Lee Hai Sung who is a director of Dooyang Hong Kong Limited, the other shareholder of the Company. In Mr Lee's draft affidavit, he seeks to depose to various disputes between the two shareholders, and he says that he verily believes that the reason for not holding the AGM on time was a conscious decision made by Milibow, and the directors of the Company nominated by Milibow, in order to obtain an advantage from the situation, because Dooyang was then interested in seeing updated financial information and accounts for the purposes of the dispute between the two shareholders.

8. Having said that, however, the position of Dooyang is that it does not object to the Court ordering a meeting to take place, nor does it object presumably to the extension of time for laying of accounts, because it is precisely the accounts that they are interested in seeing.

9. In the circumstances, in the exercise of my discretion, I take the view that the applications should be acceded to irrespective of the motives of the directors for not laying the accounts and irrespective of the reasons for the decision not to convene the meeting. The position now must be that, since both shareholders want the meetings to take place, and also in view of the fact that absent an order from the Court, the Company would not be able to comply with the various statutory requirements for the holding of meetings, whatever the motives might be of the directors, they cannot outweigh the proper exercise by the Company of its statutory obligations.

10. Consequently, I take the view that it would be proper for the Court to order in relation to MP 5793 of 2000 that the general meetings of the 1st Defendant Company for the years 1999 and 2000 be called pursuant to Section 111(2) of the Companies Ordinance to be held on 8 January 2001, and in relation to the MP 5791 of 2000, I would order that the period specified in Section 122(1A) of the Companies Ordinance in relation to the accounts of the Defendant Company in that proceeding, including a profit and loss account for the periods from 1 January 1998 to 31 December 1998 and from 1 January 1999 to 31 December 1999, be extended to such period as would expire on 8 January 2001.