NG CHI FUNG v. IMINDS INTERACTIVE LTD

HCMP 184/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 184 OF 2014

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D E C I S I O N

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1. I have before me two originating summonses issued by shareholders in two companies which are part of a group which through a holding company will or proposes to be listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

2. The first of the originating summonses (HCMP 184/2014) which concerns Adbeyond (Group) Limited is for an extension of the periods provided by section 122 of the Companies Ordinance in respect of its financial accounting periods from the date of its incorporation, 29 March 2007, to 31 March 2008, and also for the following financial year ending 31 March 2009.

3. As these periods are more than three years ago, pursuant to section 351A of the Companies Ordinance, Cap 32, there is no risk of the company being prosecuted for the breaches that the shareholders seek an order remedying.  As I explained in my decision in Modern Automobile Company Limited [1], which had not been uploaded to the Judiciary website at the time that this application was brought on, in my view it is not appropriate for the court to make orders remedying breaches which cannot be prosecuted simply to accommodate, apparently, the requirements of The Stock Exchange.  I will therefore dismiss the originating summons in HCMP 184/2014.

4. The other originating summons is a little different.  Applications are made in respect of some periods which predate the three‑year limitation period and I will not make orders in respect of those periods.  However, an order is sought in respect of the financial year commencing 1 April 2010 to 31 March 2011.  In respect of that period, an AGM did take place on 28 November 2011 and audited financial statements were put before the company.  It might therefore be thought, just from that limited information, that there has been no breach of section 122.

5. The complication that leads to the present application arises as follows.  The audited financial statements were not for the period from 1 April 2010 to 31 March 2011.  The audited financial statements were from the date of incorporation, 7 January 2008, to 31 March 2011.

6. Section 122(1) provides:

“(1) Subject to subsection (1B), the directors of every company shall lay before the company at its annual general meeting a profit and loss account or, in the case of a company not trading for profit, an income and expenditure account for the period, in the case of the first account, since the incorporation of the company, and, in any other case, since the preceding account. (Replaced 10 of 1987 s. 4)

(1A) The accounts referred to in subsection (1) shall be made up to a date falling not more than 6 months, or, in the case of a private company (other than a private company which at any time during the period to which the said accounts relate was a member of a group of companies of which a company other than a private company was a member) and a company limited by guarantee not more than 9 months, before the date of the meeting. (Added 10 of 1987 s. 4)

(1B) The court, if for any reason it thinks fit so to do, may in the case of any company and with respect to any year-

(a) substitute for the requirement in subsection (1) to lay a profit and loss account or (as the case may be) an income and expenditure account before the company at its annual general meeting a requirement to lay such account before the company at such other general meeting of the company as the court may specify; and

(b)  extend the periods of 6 and 9 months referred to in subsection (1A).  (Added 10 of 1987 s. 4)”

7. If the subsection is interpreted literally and without regard to other provisions of the Ordinance, it would appear that the audited financial statements that were put before the company in annual general meeting on 28 November 2011 did comply with subsection (1) as they were the first accounts of the company and the subsection seems to envisage it being permissible (although it would probably have resulted in a breach of section 122 of the Ordinance) to produce accounts running from the date of incorporation to whatever date directors finally decide to end the first accounting period.

8. However, it seems to me that the better view is that the subsection should be read as requiring a conforming first set of accounts to be for a financial period commencing the date of incorporation and ending not later than the latest date such account could properly be prepared and put before the company in annual general meeting with the result that both section 122 and section 111 of the Companies Ordinance, Cap 32, had been complied with.  That being the case, it means that the financial statement that was put before the company in annual general meeting on 28 November 2011 was non‑compliant and it is necessary for an order to be made remedying this fairly technical breach.

9. I will therefore make an order in the following terms in respect of the originating summons in HCMP 185/2011:

(1) A general meeting of the respondent be called within 28 days of the date of this order (“the general meeting”); all notice requirements for the said general meeting be dispensed with;

(2) The period of nine months referred to in section 122(1A) of the Companies Ordinance in respect of the profit and loss accounts of the respondent for the year ending 31 March 2011 (“the account”) be extended to the date of the general meeting;

(3) The requirements under section 122(1) of the Companies Ordinance for the respondent to lay the accounts before the respondent at its annual general meeting for 2011 be substituted by the requirement to lay the same before the respondent at the general meeting;

(4) There be no order as to costs.