JUBILANCE PROPERTIES LTD v. KAM FEI INVESTMENT (HONG KONG) LTD

HCMP 2403/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2403 OF 2013

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J U D G M E N T

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1.  I have before me three applications made by the corporate shareholders (“the Applicants”) of the three Defendant companies (“the Companies”) for orders under section 111(2) of the Companies Ordinance (“CO”) to direct the calling of the Companies’ general meetings within 28 days from the date of the orders to be made herein and for orders under section 122(1B) of the CO extending the time for audited accounts to be laid before the Companies in the general meetings so ordered.

2.  The Companies are wholly-owned subsidiaries of the Applicants. The Applicants are either direct or indirect wholly‑owned subsidiaries of Radiance Property Holdings Limited (“Radiance Property”), a company incorporated in the Cayman Islands on 14 May 2013. Radiance Property is beneficially owned by Mr Lam Ting Keung, who founded the Jinhui Group in Fujian Province, PRC, in the 1990s to engage in property development, Madam Lam Fung Ying, his wife, and Mr Eddy Pesik. Mr and Mrs Lam beneficially own 95% of Radiance Property while Mr Pesik owns the remaining 5%.

3.  On 17 September 2013, Radiance Property filed an application for new listing on the Main Board of The Stock Exchange of Hong Kong Limited (“HKSE”).

4.  As is usual in cases like these, the various non‑compliances with sections 111 and 122 of the CO were failure to hold annual general meetings within the timetable prescribed by the CO, and failure to prepare and lay audited accounts before the general meetings. These non‑compliances were discovered in the course of preparing for the listing of Radiance Property. To the credit of the professional advisers responsible for the listing, these non-compliances were disclosed in the draft prospectus submitted with the listing application on 17 September 2013.  

5.  The factors to which the court generally has regard when considering applications under 122(1B) have been summarized by Deputy High Court Judge Harris (as he then was) in Yu Sun Say v HKI Properties Limited unrep. HCMP 2556-2561, 2563, 2565-2568/2007 18 January 2008, and adopted by Kwan J (as she then was) in Re Sanliuyidu (Hong Kong) Sports Goods Co. Limited [2009] 4 HKLRD 708. Similar considerations will be taken into account in an application under section 111(2): Grand Asian Limited v Shoe Mart Company Limited unrep. HCMP 590 & 592/2013, Deputy High Court Judge Marlene Ng, 15 April 2013. They are, modified to take into account section 111, as follows:

(1) Whether the shareholders were aware of the financial position of the company in question and were not prejudiced by the non-compliances;

(2) Whether the default was inadvertent; and

(3) Whether the court is satisfied that the company would comply with the obligations to hold general meetings and to lay the audited accounts before the general meetings in the future.

6.  On the evidence, I am satisfied that these three criteria are met.  The ultimate beneficial owners of the Companies are the same viz Mr and Mrs Lam, and well as Mr Pesik. All three of them say they are aware of the Companies’ financial position and are not prejudiced by the non‑compliances, and they support the applications.  The defaults were inadvertent.  I also accept that given the present involvement of professionals who are familiar with the provisions of sections 111 and 122, the mistakes are unlikely to be made again.

7.  As emphasised by Harris J in Re Asiafair International Limited [2011] 1 HKC 63, compliance with the corporate governance provisions of the CO is important, and it is crucial that the court insists that company directors are mindful of their duties in ensuring sound and transparent corporate governance.  The management of the Companies, with the assistance of the professional advisers, appeared to have come round to taking these duties seriously and have volunteered to divulge to the HKSE the various non-compliances, the reasons for them and their proposed remedial measures.

8.  In these circumstances, I am satisfied that it is an appropriate case in which to exercise the discretion conferred on this court by the CO and I make an order in each application in terms of the originating summons as revised in the course of the hearing.

9.  In line with the requirement laid down by the Companies Judge in Re Asiafair International Limited supra, the order I make is on the basis of the Applicants’ undertaking to the effect that they will procure that the orders made herein and the reasons for seeking them are brought to the attention of the HKSE in connection with the proposed listing of Radiance Property or any other company of which the Companies are subsidiaries and are referred to in the prospectus for such listing.