GLOBAL ONE ENTERPRISES LTD v. JOHAN AMIR SHARIFUDDIN t/a LA SALLE STREET VENTURES AND OTHERS

HCMP 709/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 709 OF 2006

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J U D G M E N T

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1.  This is an application by a company brought under section 100 of the Companies Ordinance to amend its register of members by striking out the names of certain of its shareholders being the five respondents.

2.  The company was incorporated in Hong Kong in March 2004 with an authorized share capital of US$1.2 billion made up of 1.2 billion ordinary shares of US$1 each.  The first subscribers were the 1^st and 2^nd respondents, to whom 122,410,000 shares were allocated.  But this was not for money.  In lieu the 1^st respondent transferred to the company certain call and put options, giving the holder thereof the apparent right to buy into various businesses and companies including listed companies at a significant discount.

3.  This must have appeared singularly attractive, for it persuaded a group of eight investors, called collectively the Hwang group, to subscribe for 2 million of the company’s shares for cash.  There has to date been a call of US30 cents per share on these shares.

4.  Four members from the Hwang group and the 1^st and 2^nd respondents were appointed to the Board of Directors.

5.  The 3^rd, 4^th and 5^th respondents also subscribed for shares in the company, namely 12 million of them.  Again no cash was involved; these were purportedly specialists based in New York who in return for the shares subscribed for would assist in raising funds and otherwise make possible the exercise of the options the company had brought, and achieve a listing on the NASDAQ exchange in the US.

6.  But by April 2005 the Hwang group were concerned at the veracity of the options document and caused the Board to carry out an investigation.  Shortly afterwards the 1^st and 2^nd respondents resigned from the Board.

7.  The investigation revealed that the documents were irregular in a number of material ways, such that the options were in many instances for shares that were non-existent or that the options had not been given or could otherwise not be exercised.  So what the 1^st and 2^nd respondents provided in return for their shares was effectively without value; the company had thus allowed some of its shares to be subscribed for without cash by virtue of material misrepresentation.

8.  The Board resolved to rescind the allotment of all the shares that had been subscribed for without any cash payment including the so-called management team of the 3^rd, 4^th and 5^th respondents.  Of course the at fault respondents were still registered as shareholders.

9.  But meanwhile there was a development which prevented the directors from rectifying this independent of the court.  A company called Alexander Capital Markets LLC had lodged a charging order against the shares allotted to the 1^st respondent, and had served on the company a copy of the charging order and notice.

10.  With this intervention the company could not without a court order get the register rectified; thus this action came into being.

11.  Alexander Capital applied to be joined

12.  But then there were two further developments.  The first was that Alexander Capital having applied for and been granted an adjournment of its application to join then applied to have the charging order discharged.  Alexander Capital is by all accounts taking no further part.

13.  The second was that all five respondents having been served notified the company that they would not individually or collectively challenge the rescissions of the contracts whereby they acquired their shares and would not defend this the rectification application provided that the company would initiate no action against the respondents apart from these proceedings and would not be seeking costs.

14.  The company has agreed to this course.  And there has been no appearance by or for any of the five respondents.

15.  The court’s power in granting or refusing a section 100 application is a discretionary one.  In this case, I have no difficulty in exercising my discretion in granting the application and make the order asked for which includes consequential directions and covers the issue of costs as agreed.