Kan Kung Chuen Lai v. Key Fit Trustee Services Ltd

HCMP 59/2021

[2021] HKCFI 536

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 59 OF 2021

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BETWEEN

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D E C I S I O N

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1.This is an application by the directors of the respondent to seek retrospective leave to cure the director’s late compliance, on two occasions over the last three years, with section 429 of the Companies Ordinance, Cap 622, to lay before its shareholders in an annual general meeting the company’s audited financial statements within the time required under the ordinance.

2.The financial statements were required, pursuant to the ordinance, to be filed within six months of the end of the financial year which in this case meant that they ought to have been filed by 30 June of each year.  However, for the year ended on 31 December 2018, the relevant financial statements were not laid before the shareholders until 26 July 2019, and for the financial year ended 31 December 2019, they were not laid before the shareholders until 30 July 2020.  They were therefore out of time in each year. 

3.The directors have applied by way of originating summons dated 15 January 2021 for a retrospective extension of time such that the periods be extended until such date as the relevant financial statements were in fact presented or laid before the shareholders. 

4.The principles for the court to consider when making such an order have been set out comprehensively in Little Star Brands Group Limited v Best Kids International Limited (23 September 2014, HCMP 1577/2014) by Harris J.  The authorities essentially establish that the court will only grant applications if it is satisfied of three things:

“(1)  that the shareholders were aware of the financial position of the company and have not been prejudiced by the non-compliance;

(2)  the default was inadvertent;

(3)  the court is satisfied that the company will comply with its obligations in the future.”

5.As Harris J observed in paragraph 10, factors 1 and 3 are normally readily satisfied but factor 2 is one that the court may be more concerned with to ensure that the default was indeed inadvertent rather than simple indifference. 

6.In this case, having read the affirmation of the applicant as to the reasons for the non-compliance, I am satisfied that the shareholders have not been prejudiced, therefore factor 1 is satisfied. 

7.As to factor 2, I accept that the default was inadvertent.  The company is a public company, although it is not a listed company.  As a result, the time for compliance is six months rather than the nine months that would be the case if it were a private company. 

8.If it had been a question of indifference, I see no reason why the accounts would have been laid before the shareholders on 26 July 2019 and 30 July 2020 respectively.  It appears to me that there was inadvertence as to the time limits rather than simple indifference as to the obligation at all.  Therefore I am satisfied as to factor 2.

9.As to factor 3, the affidavit of the applicant indicates that the secretarial and support staff have been more fully and properly briefed as to the obligations and have been tasked with ensuring that the default does not happen again.  I am therefore satisfied that reasonable steps have been taken to ensure that the company will comply with its obligations in the future.

10.In all the circumstances, I am satisfied that it is appropriate for me to grant the relief sought.  One of the factors in this respect is whether there is any prospect of prosecution, because as the authorities make clear, if there is no prospect of prosecution under the ordinance, then the relief should not be granted.  It seems to me that there remains a prospect of prosecution because the defaults have happened within the last three years and there are two defaults rather than simply one.  I therefore cannot state with any certainty that there is no prospect of prosecution and in those circumstances it seems to me appropriate to grant the relief sought. 

11.Consequently, I grant orders as per paragraphs 1, 2, 3, and 4 of the originating summons and I make no order as to costs. 

Mr Lee Ming-tak, of Lee & Yik Lawyers, for the applicant

The respondent was not represented and did not appear