Re Ceibs Publishing Group Ltd

HCCW 12/2021

[2025] HKCFI 5736

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 12 OF 2021

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J U D G M E N T

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1.By petition presented on 8 January 2021[1] (“Petition”) the Petitioner, China Europe International Business School (中欧国际工商学院) (“P”), seeks to wind up CEIBS Publishing Group Ltd (“Company”) on the just and equitable ground under s.177(1)(f) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32).

2.On 2 February 2021, the Company applied for an order to stay the Petition pending determination of an arbitration commenced by the Company against P on 23 November 2020 (“Arbitration”) on the ground that the dispute falls within the arbitration agreements reached between the parties.

(1)  The application was heard on 26 October 2021.

(2)  By letters dated 27 October 2021, each of Digital B-School China Limited (“Digital”)[2], 江蘇雲學堂網絡科技有限公司 (“YXT”)[3] and CEIBS Management Limited (“ManCo”)[4], which were not parties to the arbitration agreements, gave an undertaking to the court that it agreed to be bound by the findings and the determination of the arbitral tribunal (“Tribunal”) in the Arbitration.

(3)  By Decision handed down on 22 November 2021 [2021] HKCFI 3513 (“Stay Decision”), this Court ordered the Petition to be stayed (“Stay Order”) with liberty to the parties to restore the Petition upon determination of the Arbitration.

3.In this Judgment, unless otherwise stated, the abbreviations used in the Stay Decision are adopted.

4.By Partial Final Award (“PFA”) dated 15 January 2024, the Tribunal dismissed the Company’s claims and substantially upheld P’s counterclaim in the Arbitration and made a number of declarations sought by P in the counterclaim.

5.On 12 April 2024, R1-R3[5] (defined as “Chengwei Parties” in the PFA) and Digital applied to set aside the PFA in HCCT 32/2024 (“Setting Aside Application”). Shortly thereafter, P commenced HCCT 33/2024 to enforce the PFA[6] (“Enforcement Proceedings”).

6.On 7 January 2025, Mimmie Chan J dismissed the Setting Aside Application, granted leave to P to enforce the PFA as a judgment of the court, and entered judgment in terms of the PFA (“Enforcement Decision”) [7].

7.On 28 March 2025, P applied for leave to lift the stay of the Petition. The application was unnecessary as the Stay Order gave liberty to the parties to restore the Petition upon determination of the Arbitration.

8.At the hearing before this Court on 11 July 2025, leave was granted to P to re-amend the Petition to (1) remove the allegation of quasi partnership and the complaints relating thereto, (2) add the findings and declarations made in the PFA and (3) remove all named respondents to the Petition. The latter reflects the fact that the only relief sought in the Petition is a winding up order, it is unnecessary to name any respondent to the Petition. If any shareholder wishes to oppose the Petition, it can file a notice of intention to appear pursuant to rule 30 of the Companies (Winding up) Rules (Cap. 32H).

9.P’s case is simple. As Mr Rimsky Yuen SC[8] submits, P’s complaint on exclusion from the management of the Company and the Company Group for the last 5 years is fully vindicated and confirmed in the PFA:

(1)  The Tribunal found that, by reason of the Chengwei Parties’[9] and Digital’s breaches of the SPA and the M&A, P was deprived of equal board representation, relative majority voting power in shareholders’ meetings and its ability to participate in the Company’s management, and its interests as a shareholder have been seriously and unfairly prejudiced[10].

(2)  This alone is sufficient to justify the court making a winding up order against the Company on the just and equitable ground.

(3)  Since Digital took control, the Company’s operating entities in the Mainland (i.e. CE International and Fenghe) (together “PRC Operating Entities”) have been making substantial losses and the value of the business severely damaged. The cause of such losses is unknown to P due to its exclusion[11].

10.Further, if necessary, P also relies on (1) a complete functional deadlock at both the shareholder and board levels[12] and (2) the lack of probity of the New Directors in purporting to act on behalf of the Company, including by commencing the Arbitration and instructing the Company’s secretary to prepare a board resolution to effect the resignation of one of the New Directors without authority[13].

11.Only Digital appears and opposes the Petition. Mr Kwan Ping Kan, counsel for Digital, submits that the past wrongdoings committed against P are not sufficient for the court to make a winding up order. Digital has proposed a series of undertakings to regulate the appointment of the fifth director and secure quorum at board and general meetings, and has offered to waive certain veto powers. These would resolve any potential deadlock in the Company.

12.For the reasons explained below, I do not think that Digital’s proposals are workable or that they constitute a valid ground in opposition to the Petition. The proposals in effect require P to accept Digital/YXT to be its joint venture partner when neither of them were parties to the 2007 Agreements. There is no proper basis to compel P to accept and be bound by the contractual terms with a new party which it neither chose nor trusted.

A.  Factual Background

13.The material facts of the case are set out in Section B of the Stay Decision. For present purposes, the essential background may be summarised as follows.

14.The Petition arose out of a shareholder dispute between P, which holds 40% of the Company’s equity in the form of Class A Common Shares, and the following parties[14]:

(1)  Chengwei Parties namely, (a) Chengwei Evergreen Capital LP (“Chengwei Evergreen”), (b) Chengwei Ventures Evergreen Advisors Fund LLC (“Chengwei Ventures”) and (c) Chengwei Partners LP (“Chengwei Partners”) who are parties to the 2007 Agreements and collectively held Preferred Shares representing 39% of the Company’s equity until 29 January 2019;

(2)  Digital, which acquired 39% of the Company’s equity on 29 January 2019 following the transfer of the Chengwei Parties’ Preferred Shares;

(3)  YXT, an affiliate of the holding company of Digital; and

(4)  ManCo, a special purpose vehicle established to hold 21% of the Company’s equity in the form of Class B Common Shares (“ManCo Shares”).

15.Following the stay of the Petition, P advanced counterclaims against the Chengwei Parties and Digital in the Arbitration for breaches of contract, breach of common understandings and legitimate expectations, and breach of an implied duty of good faith under the 2007 Agreements and the M&A. These counterclaims arose from undisclosed dealings concerning the ManCo Shares, wrongful board appointments, and the wrongful refusal to recognise or give effect to P’s director appointments.

16.In the PFA, the Tribunal made the following declarations:

(1)  Both the 2016 Transfer and the 2020 Transfers (a) were made by the Chengwei Parties in breach of section 7.2 of the SPA, (b) were invalid and ineffective in transferring beneficial ownership of the ManCo Shares, and (c) were ineffective in directly or indirectly transferring the beneficial ownership of the Class B Common Shares[15].

(2)  Since both the 2016 Transfer and the 2020 Transfers were ineffective in transferring the beneficial interest in the ManCo Shares to Chengwei HK and Unicentury, the appointment of Ms Ma Ying and one of the New Directors to the Company’s board was invalid under the M&A[16].

(3)  The Chengwei Parties breached section 2.3(e) of the VA by purporting to appoint the New Directors to the Company’s board without P’s consent[17].

(4)  Digital had wrongfully refused to recognise and effectuate P’s nominated directors, in breach of sections 2.2(b) and 2.3(b) of the VA and Articles 73(b) and 74 of the M&A[18].

(5)  By reason of the aforesaid matters[19]:

(a)  P had suffered a loss of equal representation on the Company’s board;

(b)  P had suffered a loss of relative majority voting power in shareholders’ meetings;

(c)  P had been deprived of its ability to participate in the management of the Company; and

(d)  P’s interests as a shareholder of the Company had been seriously and unfairly prejudiced.

B.  Applicable Principles

17.The principles are well-established and have been summarised in Re South Asia Group (HK) Ltd [2024] HKCFI 2070, §§155-156, citing Lau v Chu [2020] 1 WLR 4656 §§20-21, 52:

(1)  Winding-up is a shareholders’ remedy of last resort. This does not mean that winding up is unavailable to members if they have other remedy. The member retains a significant element of choice in the remedy to be sought, even though the court has the last word.

(2)  The court carries out a three-stage analysis and asks (a) Is the petitioner entitled to some relief? (b) If so, would a winding up be just and equitable if there were no other remedy available? (c) If so, has the petitioner unreasonably failed to pursue some other available remedy instead of seeking winding up?

(3)  The legal burden of proof is on the petitioner at stages (a) and (b). But it shifts to the respondent at stage (c). A judge may reasonably expect the respondent to put forward one or more remedies which it is alleged were both available and sufficiently attractive as an alternative to make it unreasonable to continue to seek a winding up.

18.In considering whether it is just and equitable to order the company to be wound up, the court construe the words “just and equitable” generally, and apply the concept of justice and equity in its widest sense. It is wrong to create categories of headings under which cases must be brought if the just and equitable ground is to be applicable (Re Klimvest plc [2023] 1 BCLC 388, §§189-193).

19.Where a winding up petition is presented on the “just and equitable” ground, and the underlying disputes between the parties are arbitrable:

(1)  The court retains exclusive jurisdiction to decide whether it is just and equitable to wind up a company, and whether a winding up order should be made on that ground (PI1 & PI2 v MR [2025] HKCFI 1110, §29(2) per Mimmie Chan J; FamilyMart v Ting Chuan [2024] 1 All ER (Comm) 697, §80).

(2)  In doing so, the court would have regard to all the relevant circumstances at the date of the hearing (FamilyMart, §81), including the reasoning and findings of fact made by the arbitral tribunal, which would be binding on the parties to the arbitration and those undertook to be bound (FamilyMart, §§92, 93).

(3)  In this regard, declarations made by the arbitral tribunal that the majority shareholder had breached equitable rights of the minority shareholder, and that the relationship had broken down, would be highly relevant to an application for just and equitable winding up of the company or an application for a share buyout order (FamilyMart, §96; PI1 & PI2, §24).

(4)  Ultimately, the court would consider, whether by reason of the oppressive and discriminatory conduct considered and found by the tribunal and on the evidence adduced before it at the hearing of the petition, it is just and equitable to wind up the company (PI1 & PI2, §38).

C.  Discussion

C1.  Exclusion from Management

20.It is well-established that a breach of a shareholder’s right and entitlement to appoint and remove a director so as to participate in the management of a company may be sufficient for the court to make a winding-up order on the just and equitable ground (Re A&BC Chewing Gum Ltd [1975] 1 All ER 1017, 1028e-f per Plowman J). Similarly, exclusion from management in breach of mutual understandings could constitute unfair prejudice and render it just and equitable to wind up the company (Kam Leung Sui Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501, §§56, 58, 61).

21.In the present case, the Chengwei Parties’ and Digital’s breaches of the 2007 Agreements and the M&A and their conduct in excluding P from the management of the Company, as found in the PFA, are both unfair and prejudicial to P’s interests. This finding is sufficient for the court to make a winding up order against the Company on the just and equitable ground. The reasons are as follows.

22.It is well established that the concept of injustice or unfairness can form the basis of a just and equitable winding up (Re Saul D Harrison &Sons plc [1994] BCC 475, 489F, per Hoffmann LJ (as he then was), citing the seminal passage in Re Westbourne Galleries [1973] AC 360, per Lord Wilberforce. The approach to the concept of unfairness in unfair prejudice petition runs parallel to the concept of “just and equitable” as a ground for winding up (O'Neill v Phillips [1999] 1 W.L.R. 1092, 1099B, per Lord Hoffmann).

23.The Chengwei Parties’ and Digital’s breaches of the 2007 Agreements and the M&A were fundamental, as they subverted the carefully calibrated governance structure agreed between P and the Chengwei Parties. As the Tribunal found:

(1)  The 2007 Agreements were designed to establish “a careful balance of power” within the joint venture between P and the Chengwei Parties, and that the “finely-tuned balance of power ensured that neither [P] nor [the Chengwei Parties] would have the ability to unilaterally control the [joint venture]”[20].

(2)  The intention of the voting and share transfer restrictions in the 2007 Agreements and the M&A was to prevent beneficial ownership of any of the Company’s securities, including Class B Common Shares, from passing into the hands of a person that had not undertaken to be bound by the applicable share transfer and voting restrictions in the 2007 Agreements[21].

(3)  This carefully calibrated governance framework agreed under the 2007 Agreements and the M&A was undermined by the following breaches (collectively “Breaches”):

(a)  First, each attempt to shift control of ManCo (and thereby the Class B Common Shares), including the 2016 Transfer and the 2020 Transfers, was found to be in breach of section 7.2 of the SPA and, consequently, were “invalid and ineffective”[22];

(b)  Second, the purported actions by ManCo to join force with the Chengwei Parties and Digital to elect a fifth director to the Board (including Ms Ma Ying and one of the 3 New Directors) pursuant to the invalidly acquired voting rights from ManCo Shares were found to be “substantively invalid under the [M&A]”[23];

(c)  Third, the appointment of the New Directors in place of Mr Li, Ms Ping Ping and Ms Ma Ying without the prior written consent of P was found to constitute a breach of section 2.3(e) of the VA[24]; and

(d)  Fourth, Digital’s wrongful refusal to recognise and effectuate P’s requested replacement of directors unless P withdrew its objections to the appointment of the New Directors constituted a breach of sections 2.2(b) and 2.3(b) of the VA and Articles 73(b) and 74 of the M&A[25].

24.It was also found by the Tribunal that the Breaches had the direct and prejudicial consequence of depriving and undermining P’s rights to participate in the management of the Company in accordance with the terms of the M&A and the 2007 Agreements[26] in that:

(1)  P had suffered a loss of equal representation on the Company’s board, the composition of which at all times should have been 2 directors nominated by P and 2 directors nominated by the Chengwei Parties;[27]

(2)  P had suffered a loss of relative majority power in shareholders’ meetings, subject at all times to the minority rights of the Chengwei Parties under the M&A and the VA[28]; and

(3)  P had been deprived of its ability to participate in the management of the Company in that it had been (a) prevented from appointing 2 directors to the Company’s board and (b) deprived of the relative majority voting power in shareholders’ meeting and, consequently, the ability to nominate the CEO of the Company[29].

25.The manner by which the Chengwei Parties exited the joint venture, and with YXT (through its control over Digital and Unicentury) substituted as P’s joint venture partner has compounded the unfair prejudice to P. As the Tribunal found:

(1)  The Chengwei Parties’ exit of the joint venture was “stealthy and sharp”: the Chengwei Parties “kept the transaction and all of the steps leading up to it entirely secret from [P], informing [P] only after the deal had closed”[30]. Concomitantly, YXT also “made a strategic decision not to discuss the contemplated acquisition” with P[31].

(2)  The change of control resulting from YXT’s acquisition of a controlling stake in the Company radically altered the nature of the joint venture and relegated P to the status of a minority shareholder without the protections it was originally afforded:

“… [the Chengwei Parties] had never disclosed to [P] that it had purported in 2016 to acquire indirect ownership of the Class B Common Shares, or that it had purported in 2018 to appoint a director to the fifth position on the [Company’s board]; indeed, [the Chengwei Parties] had never at any point sought to exercise control over [the Company] in any fashion. Following the YXT Transaction[32] however, YXT purportedly would control [the Company] and the entire [the Company] Group, and [P] would be relegated to the position of a minority shareholder – without the benefit of any of the minority shareholder protections that [the Chengwei Parties] had enjoyed under the Voting Agreement. It is difficult to imagine a more dramatic change to the situation to [shareholder level of the joint venture]”.[33]

(3)  This radical alteration of the joint venture was not merely the replacement of one financial investor with another. Rather, “What was especially surprising was that [the Chengwei Parties] did not merely swap in a new financial investor, but rather purported to sell control of the [joint venture] to a strategic buyer that was in the same industry as [the Company]. The result was a radical change to the structure of the [joint venture]”[34].

C2.  Digital’s grounds in opposition

26.Mr Kwan (rightly) does not dispute the findings of unfair prejudice made by the Tribunal but urges the court not to make a winding-up order on the following grounds:

(1)  The Company remains operational and viable;

(2)  There is no deadlock at the Company’s board level or shareholders’ level;

(3)  There is no loss of substratum;

(4)  The past wrongdoing as found by the Tribunal cannot be equated with lack of probity on the part of Digital, and in any event, cannot justify a winding up order which is “a disproportionate response that punishes all stakeholders, including employees and creditors, for issues that can be resolved through less drastic means”; and

(5)  Liquidation is “value destructive” and lacks utility.

27.Mr Kwan submits that winding up is a remedy of last resort[35], and the court’s jurisdiction in granting a remedy to unfair prejudice is prospective and the court should fashion relief that “put[s] right and cure[s] for the future” (Re Neath Rugby [2008] BCC 390, §245[36]).

28.The second to fourth grounds (§26(2)-(4) above) are predicated on Digital’s proposals, which Mr Kwan submits are sufficient to address P’s contention that there will be deadlock at the board and shareholders’ level. The proposals may be summarised as follows:

(1)  Digital undertakes to meet the quorum requirement for board and general meetings[37];

(2)  To avoid deadlock at the board level, the fifth board seat will be filled through the following mechanism[38]:

(a)  A 2-member nomination committee comprising one director appointed by each of YXT and P will be formed;

(b)  P’s nominated director will chair the committee to reflect its status as the relative majority shareholder;

(c)  The committee will appoint an external recruitment consultant as advisor, who will prepare a set of objective criteria for candidate selection to be approved by the committee, and provide independent expert opinion;

(d)  Each committee member can nominate a candidate independent of P, Digital or their affiliates;

(e)  The advisor will issue a non-binding opinion on the more suitable candidate, and the committee will recommend a single candidate with any disagreements noted; and

(f)  The appointment will be subject to shareholders’ approval pursuant to the Article 73(d) of the M&A.

(3)  To avoid deadlock at the shareholders’ level, Digital offers to[39]:

(a)  waive wholly its veto rights over the adoption or amendment of annual budget and operating plan;

(b)  subject to certain qualifications, waive its veto rights over the appointment or removal of counsel or auditor and increases in CEO remuneration; and

(c)  raise the threshold amount for its veto right in relation to financial commitments, expenditures, creation of pledges or encumbrances, disposal of the Company’s assets and settlement of litigation.

29.Mr Kwan characterises the proposals as substantial concessions which would enhance the operational flexibility of the Company; maintain and respect P’s relative majority voting right and the ability to pass ordinary resolutions in accordance with the 2007 Agreements; and at the same time, preserve Digital’s residual reserve powers over important matters such as major share issuances, amendments to the M&A, and voluntary winding up[40].

30.In my view, the starting point is that P has made out its case that by reason of exclusion from management, the affairs of the Company have been conducted by the Chengwei Parties, YXT and Digital in an unfairly prejudicial manner. This is a sufficient ground for the court to wind up the Company on the just and equitable ground. While in considering whether to grant the relief sought by a petitioner, the court “is entitled to look at the reality and practicalities of the overall situation, past, present and future” (Grace v Biagoli[41] at §73), this does not mean that the court must consider and assess the proposals put forward by a respondent who was found to have engaged in unfairly prejudicial conduct, and decide whether they are sufficient to redress the wrong done to the petitioner. This is particularly so when the proposals are put forward by Digital (under the control of YXT), an entity with which P has never agreed to cooperate in pursuing the joint venture business, and the proposals have the effect of re-writing the terms of the 2007 Agreements. The reason is obvious. It is not the function of the court to consider whether the commercial terms proposed by the respondent are sufficient or acceptable to the petitioner. The court is not well placed to make that commercial judgement for the parties. It is for the respondent to persuade the petitioner to accept the proposals. If the respondent fails to persuade the petitioner to accept the proposals, I am unable to see any proper basis (none has been identified) for the court to intervene, still less to require the petitioner to accept a new joint venture partner.

31.Even if, contrary to my view, it is necessary for the court to assess Digital’s proposals, I do not think that they provide a sufficient basis to deny the winding up relief sought by P:

(1)  The background of the Company is unique: P is a premier business school established with the support of the Government of the People’s Republic of China and the European Commission, and the Company was formed to promote P’s reputation as a leading business school in the Mainland[42]. The terms of the 2007 Agreements were carefully calibrated after extensive negotiations between P and the Chengwei Parties.

(2)  YXT was not a party with whom P chose to cooperate. Worse still, YXT (acted through Digital) was found to have taken part in the covert acquisition of a controlling majority stake in the Company through the impugned 2019 Transfer and the 2020 Transfers which had been deliberately concealed from P. The replacement of the Chengwei Parties with YXT as the effective joint venture partner of P was found to be a “forced marriage” between the parties[43].

(3)  If the court were to accept Digital’s proposals, it would in effect be imposing upon P a suite of re-written 2007 Agreements and forcing P to cooperate with a party it did not choose nor trust. Such course would not be just or equitable.

32.P’s stance is that it has lost all the trust and confidence in Digital’s management and does not accept the bona fides of Digital’s assertion that it is prepared to cooperate with P in the operation of the Company[44]. Such stance is amply justified in light of Digital’s past conduct, which continues even after the conclusion of the Arbitration:

(1)  Digital’s proposals only surface 5 years after YXT acquired an indirect interest in the Company, and 1.5 years after the Tribunal handed down the PFA[45].

(2)  The only reason given for the delay is an assertion that YXT’s management was occupied by the launch of several other business initiatives during the first half of 2025, and only by June 2025 “found time to consider the way to deal with the investment in the Company”[46]. Such explanation is not what one would expect from a party who genuinely wishes to address and remedy its serious wrongdoings in the past.

(3)  Digital is not an innocent party. It had funded the New Directors to contest the Arbitration, which was described by the Tribunal as a “hostile litigation against [P] in the context of the Parties’ contest for control of [the Company]”[47], and subsequently attempted to set aside the PFA together with the Chengwei Parties[48].

(4)  Having lost the Arbitration and the Setting Aside Application and being ordered to pay costs, Digital has not complied with the costs orders made by the Tribunal on 20 November 2024 (“Arbitration Costs Order”) or the costs order made by Mimmie Chan J in the Enforcement Decision (“Enforcement Costs Order”) (collectively “Costs Orders”).

(5)  There is nothing to indicate that Digital has any intention to pay the costs ordered against it. Digital’s legal representatives in the Enforcement Proceedings (King & Wood Mallesons) have ceased to act for it in those proceedings[49], and its current solicitors state that they have no instructions to accept service of statutory demand in relation to the Arbitration Costs Order or the Enforcement Costs Order[50].

(6)  Digital’s assertion that it has been actively liaising or pressing the Chengwei Parties towards the satisfaction of the Costs Orders rings very hollow.

33.For completeness, I do not think that approach set out in Re Neath Rugby is applicable to the present case. There, the court found that the proposed offer of settlement preserved the spirit of the original agreement between the existing shareholders, the identity of the shareholders remained unchanged, and the prejudice found was not so serious as to warrant a buy-out (§290). By contrast, Digital’s proposals cannot preserve the spirit of the 2007 Agreements made between P and the Chengwei Parties, as the negotiated bargain has been fundamentally subverted by the substitution of YXT (acting through Digital) as P’s joint venture counterparty.

C3.  Alleged Reliance on the Chengwei Parties’ Misrepresentations

34.In his affirmation dated 18 August 2025, Mr Xiang (on behalf of Digital) asserts that Digital acted in the manner found to be seriously and unfairly prejudicial because the Chengwei Parties had misrepresented that the 2020 Transfers were effective; “but for” those misrepresentations, YXT, Digital and the New Directors would not have undertaken the impugned conduct[51].

35.Whether the affairs of the Company have been conducted in a manner unfairly prejudicial to the interests of its members is an objective test; it is irrelevant whether it was intended to be so (Re Sam Weller & Sons Ltd [1990] Ch 682, 690-E). Digital’s conduct was, as found by the Tribunal, unfairly prejudicial to P’s interests.

36.In any event, even if Digital were misled, its recourse lies against the Chengwei Parties. The Tribunal found that YXT had engaged lawyers to conduct legal due diligence and negotiated extensive warranties and indemnities in the agreement by which equity in Digital and ManCo was transferred to Unicentury, which reflected both an awareness of risks as to the transferability of the shares and a deliberate allocation of that risk to the Chengwei Parties and Zhou[52]. Mr Kwan (rightly) does not press this point in his oral submissions.

C4.  P’s Alternative Grounds for Winding Up

37.It is unnecessary to deal with the alternative grounds advanced by P. For completeness, I shall briefly explain why I consider the alternative grounds advanced by P are well-founded.

38.Despite Digital’s proposals, there remains a real possibility of functional deadlock between P and Digital:

(1)  At the board level, the core structure remains a 2:2 split between P and Digital; each of P and Digital is entitled to appoint 2 directors and neither party is entitled to appoint the fifth director. As such, no business can be transacted at the board level absent cooperation between P and Digital[53].

(2)  Digital’s proposed nomination and appointment mechanism for the fifth director does not remedy this concern, as it nonetheless requires consensus between P and Digital: both parties have equal say on the nomination committee, and any appointment requires shareholder approval by a majority in voting power[54]. Deadlock may still happen at the stage of appointment.

(3)  At the shareholder level, while P enjoys a relative majority shareholding (by 1%), Digital’s written consent remains necessary for significant corporate actions, such as the adoption or amendment of the annual budget and operating plan of the Company[55].

(4)  While Digital has offered certain concessions on the exercise of its veto rights, significant areas of management remain subject to Digital’s veto right where the matters exceed the proposed thresholds, including major capital expenditure, provision of guarantees, and hiring, dismissal or remuneration of the CEO. Given the parties’ acrimonious relationship, it is unrealistic to expect them to be able to cooperate, let alone in a meaningful manner over any matters. Such disagreement would only paralyse the management of the Company.

(5)  Finally, as regards Digital’s undertaking to meet the quorum requirements at both board and the shareholders’ levels, I agree with Mr Yuen that if Digital reneges upon its undertaking, P’s only recourse would be to return to court, which is undesirable as the court cannot be expected to supervise commercial undertakings on an ongoing basis. In view of Digital’s failure to honour the Costs Orders, it would not be safe or proper to rely on the undertakings given by Digital.

39.As for the second alternative ground (i.e. the New Directors’ lack of probity), I accept that, viewing the facts in the round, the following conduct, taken cumulatively, demonstrates a want of probity:

(1)  The New Directors kept the 2020 Transfers confidential from P;

(2)  The New Directors purported to act on behalf of the Company in commencing the Arbitration against P’s interests; and

(3)  The New Directors instructed the Company’s secretary to prepare a board resolution to effect the resignation of one of the New Directors without proper authority[56].

C5.  Lack of Alternative Remedy

40.Finally, while Mr Kwan flags the possibility of a buy out in his skeleton, no proposal has in fact been put forward by Digital.

41.On the other hand, P has pleaded that buy out is not an appropriate remedy for the following reasons[57]:

(1)  P is not prepared to be bought out where to do so would confer upon the other shareholders a unilateral right to use and access P’s trademarks, trade names, service marks, logos and business names to the detriment of P’s reputation and goodwill;

(2)  P is not desirous of buying out the shares of Digital, as it does not wish to carry on the business of the Company on its own; and

(3)  It would be unreasonable and unjust to require P to purchase Digital’s shares as Digital had since June 2020 wrongfully controlled the Company and deprived P of its right to participate in the management of the Company. During their management, the PRC Operating Entities continued to suffer substantial losses and their value has been severely damaged. It would be unjust for P to purchase Digital’s shares, even if adjustments can be made to the value of the Company (which has not been made out), as the present state of the PRC Operating Entities are very different from the time when P was still involved in the management of the Company.

D.  Disposition

42.For all the reasons set out above, I hold that:

(1)  P has been deprived of its rights to participate in the management of the Company for 5 years, and its rights and interests as a member of the Company have been seriously and unfairly prejudiced[58];

(2)  The management and conduct of the Company are such that it is neither just nor equitable to require P to continue as a member[59];

(3)  There is no alternative remedy available to redress the wrong done to P; and

(4)  it is just and equitable for the court to make a winding up order against the Company.

43.As for costs, I make a costs order nisi that the costs of and occasioned by the Petition, including all costs reserved, be paid by Digital to P, the Company and the Official Receiver, to be taxed if not agreed with certificate for 2 counsel.

Mr Rimsky Yuen SC leading Mr Alexsander Wong, Mr Justin Ho and Mr Jonathan Fung, instructed by Chong & Partners LLP, for the Petitioner

Mr Kwan Ping Kan, instructed by Davis Polk & Wardwell, for Digital

The Company is not represented and absent

The Official Receiver is absent