WIDE OCEAN TECHNOLOGIES LTD AND ANOTHER v. ICO HOLDINGS LTD

HCMP 1751/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1751 OF 2013

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J U D G M E N T

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1.  There are before me 2 applications by ICO Holdings Limited and ICO Technology Limited (collectively “the Companies”) under section 122(1B) of the Companies Ordinance for extension of time for compliance with statutory obligations.

The non-compliance

2.  Sections 122(1) and (1A) of the Companies Ordinance (“the Ordinance”) provide that the profit and loss accounts must be laid before the company at an AGM held, in the case of a private company, not more than 9 months after the period covered by the accounts.

3.  The non-compliance of each of the Companies took the form of failure to lay its profit and loss account in time before various AGMs.

The legal principles

4.  The factors to which the court generally has regard in applications of this sort have been summarized in Yu Sun Say v HKI Properties Limited HCMP 2556-2561, 2563, 2565-2568/2007, 29.1.2008, per Deputy Judge Harris (as he then was) and adopted by Kwan J (as she then was) in Re Sanliuyidu (Hong Kong) Sports Goods Co. Limited [2009] 4 HKLRD 708:

(i) Whether the shareholders were aware of the financial position of the company in question and thus were not prejudiced by the non-compliance (“the 1^st factor”);

(ii) Whether the default was inadvertent (“the 2^nd factor”); and

(iii) Whether the court is satisfied that the company would comply with the obligation to lay its profits and loss accounts or income and expenditure statements before general meetings in future (“the 3^rd factor”).

Application of the legal principles

5.  The non-compliance was discovered in the course of preparation for listing of the ICO Group (of which the Companies formed part) on the Growth Enterprise Market of the Stock Exchange.  The relevant profit and loss accounts covered various periods between 2002 and 2012 for ICO Holdings and 1996-1999 and 2005 for ICO Technology. 

6.  AGMs were held by the Companies each year.  It was acknowledged in the AGMs that the accounts were not yet prepared.  When the accounts were later made available they were considered at the subsequent AGM.  All of these accounts have in fact been approved at AGMs more than 9 months after the end of the relevant financial years. 

7.  Specifically in respect of ICO Technology, the Company was running at a loss in the years 1997 and 1999.  The IRD advised that it would not be issuing any profits tax return for the next 3 years of assessment.  The deponent genuinely but erroneously thought that no audited accounts need to be prepared for those financial years.  ICO Technology was having negative equity when the past majority shareholder, Excel Systems Ltd exited.  Excel has since been dissolved in 2006.  The directors and shareholders (past and present) were aware of the financial position of ICO Holdings and have not been prejudiced.

8.  The present applications are supported by all shareholders of each of the plaintiffs.  The 1^st factor is satisfied.

9.  The Companies’ legal compliance matters were used to be handled by professional secretarial service providers.  The boards of directors did not anticipate any issue of non-compliance.  The Companies had nothing to hide from their shareholders.  The non-compliance was inadvertent.  The 2^nd factor is satisfied. 

10.  Each deponent is a director in the respective Company.  Each has confirmed that his company will ensure future compliance with the relevant statutory requirements.  If listing is successful, the future audit committee of the listed group will devote special attention to the preparation of accounts and related matters with the listed group.  The 3^rd factor is satisfied. 

11.  I note that the non-compliance of each company has occurred over a number of years.  Having considered their explanations, I am satisfied that the directors were unintended, ignorant as to the requirements of the law, but had no bad faith. 

12.  The plaintiffs are willing to give an undertaking that they will procure that the orders herein and the reasons for seeking them are brought to the attention of the Stock Exchange of Hong Kong Ltd in connection with the proposed listing of the ICO Group or any other company of which the Companies are subsidiaries and are referred to in any prospectus for such listing: Re Asiafair International Ltd & ors [2011] 1 HKC 63 at 65G to H.

Order

13.  I therefore grant an order that the time for the Companies  to lay its profit and loss accounts at its AGM be extended as follows:

In respect of ICO Holdings

	Accounts for financial year ended	Extended date for laying of the Accounts under s.122(1B)
(a)	31 March 2002	31 December 2003
(b)	31 March 2003	31 December 2004
(c)	31 March 2005	15 March 2006
(d)	31 March 2006	15 March 2007
(e)	31 March 2007	15 March 2008
(f)	31 March 2008	15 March 2009
(g)	31 March 2009	8 April 2010
(h)	31 March 2010	17 May 2011
(i)	31 March 2011	22 March 2012
(j)	31 March 2012	20 March 2013

In respect of ICO Technology

	Accounts for financial year ended	Extended date for laying of the Accounts under s. 122(1B)
(a)	31 December 1996	26 September 1998
(b)	31 March 1997*	26 September 2000
(c)	31 March 1998	26 September 2000
(d)	31 March 1999	26 September 2000
(e)	31 March 2005	30 November 2006

(* There has been a change in end date of a financial year.)

14.  I thank Ms Li for her assistance.