Yut Yat Co Ltd v. Wu Shaoning Topmart Ltd

HCMP 736/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO736 OF 2016

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J U D G M E N T

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1.This is an application under section 570 of the Companies Ordinance, Cap 622. The applicant seeks an order that an EGM of the 2^nd respondent (“the Company”) be ordered to be convened (with notice dispensed with) and held within the next 7 days for the purpose of appointing directors; and that one member of the Company present in person or by proxy at the meeting shall constitute a sufficient quorum.

2.The background to the application is this.  China Agrotech Holdings Limited (“the Listco”) is in liquidation.  Yut Yat Company Limited (“the Applicant”) is a wholly owned subsidiary of the Listco and the sole beneficial owner of all the issued shares of the Company.

3.Mr Liu Yiu Keung Stephen and Yen Ching Wai David, have been appointed joint liquidators of the Listco on 17 August 2015 and of the Applicant on 29 February 2016.

4.The Company was incorporated in Hong Kong and is a wholly owned subsidiary of the Applicant.

5.The Company has issued 2 shares, registered in the names of the Applicant and the 1^st respondent (“Wu”).  Wu holds his share on trust for the Applicant, as evidenced by a Declaration of Trust incorporating a power of attorney dated 24 May 1999 and an Instrument of Transfer executed by Wu leaving blank the transferee’s name.

6.The Company has a few pending matters: (i) civil proceedings in the Mainland filed against it as one the defendants, with an imminent hearing fixed for 10 May 2016 in Qianhai; (ii) the need to acknowledge a tax refund payable to the Company; and (iii) to approve and register the transfer of ownership of Wu’s share to the Applicant.

7.At present, only Wu is capable of attending and voting at the intended EGM.  However, by reason of his bankruptcy, Wu has been precluded by law (s.480(1) of Cap 622) and article 9(b) of the Articles of Association of the Company from acting as a director.  He is also uncontactable.

8.The Official Receiver has been informed of the present application but had no comment.  The Declaration of Trust and power of attorney and the Instrument of Transfer[1] form compelling evidence to prove that the Applicant is the beneficial ownership of the shares held in the name of Wu.  I am satisfied that Wu’s share in the Company has not vested in the Official Receiver by virtue of Wu’s bankruptcy.  Accordingly the Applicant is the sole beneficial owner of all the issued shares in the Company.

9.If the Company does not have a director or sufficient directors to form a quorum, section 569 of Cap 622 permits any director or any 2 members of the Company to form a quorum to convene an EGM, provided the articles of the Company do not make other provision.  However, article 23 of the Articles of Association of the Company requires 2 members to form a quorum for all general meetings. 

10.With no director and only one registered shareholder, it is impractical to call a general meeting of the Company: section 570(1) of Cap 622.

11.In Re Universal Horizon Investment Ltd [2000] 3 HKC 627 at 630 F-G, Rogers JA stated that:

“Section 114B [predecessor of section 570(1)] is designed to prevent what might be a ‘log jam’ in the operation of the Company. If, for one reason or another, a company cannot operate properly by reason of there being a failure to hold a meeting or a failure of directors either to be able or willing to call a meeting, section 114B can be used to prevent the ‘log jam’ continuing.”

12.In Re Li Wancheng, HCMP 155/2008 (5 March 2008) per Kwan J (as she then was), only one director remained on the board whilst the articles of association required 2.  The only 2 members of the company both held shares on trust for another company.  One member died and no probate was applied for. There was thus only one member capable of attending a general meeting and hence insufficient to constitute a quorum.  The court gave an order under s.114B.

13.I am satisfied in the circumstances of this case that it is appropriate for the court to order a general meeting in the terms as sought in paragraph 1 of this judgment.

14.Costs of this application (including costs of today’s hearing) is summarily assessed at $85,000 to be borne by the Company.

15.I thank Mr Lau for his assistance.

Mr Edward Lau of Edward Lau, Wong & Lou, for the applicant

The 1^st and 2^nd respondents were not represented and did not appear