Read the full judgment text of HCCW 000373/2007 on BabelCite. This High Court CFI judgment was delivered on 8 May 2008 before Kwan J.
Companies – winding-up – validation order under section 182 of the Companies Ordinance, Cap 32 – petition presented by minority shareholders on the just and equitable ground, alternatively seeking buy-out under section 168A – solvent family-run company with 45 shareholders, mostly descendants of founders – board and family members holding over 55% of shares – application by company for validation of interim special dividend of $102 million and $4,926,457.17 in deposits held in current accounts of 6 shareholders – whether interim special dividend should be validated – held: yes, directors' power under article 90 of Table A, 1950 ed to declare interim dividends justified by profits, and directors' reasons were ones an intelligent and honest man could reasonably hold – whether pre-2001 deposits in current accounts should be treated as originating from unclaimed dividends – held: no, the general ledger from the 1980s to 2000 did not specify the source of deposit funds, and the company had not explained the composition of pre-2001 deposits despite three affidavits – whether interest at 2.75% per annum is payable on unclaimed dividends held in current accounts – held: no, article 96 of Table A provides that no dividend shall bear interest against the company, and section 170(1)(g) of the Companies Ordinance provides that sums due to members by way of dividends are not deemed to be debts of the company in winding up – to displace this, there must be an express or implied agreement converting the unpaid dividend into a loan, requiring consideration from the company (Re LB Holliday & Co Ltd; Re Associated Electronic Services Pty Ltd; Re Severn and Wye and Severn Bridge Railway Co Ltd) – whether the 1st respondent's director's bonus should be validated – held: no, in the absence of evidence of approval in general meeting – whether net deposits should be validated – held: no, substantial pre-2001 deposits without explanation of source, and the 1st respondent and Chan Wing Kin had negative net deposit balances exceeding dividends and bonus owed – validation order granted for $102 million interim special dividend, and for dividend-origin deposits since 2001 in respect of four specified shareholders (Chan Che Shun $184,800.00, Chan Che Keung $187,055.90, Chan Che Wai $202,400.00, Chan Che Shing $31,200.00) – petitioners' costs of 8 May 2008 hearing in any event; costs of summons and March 2008 hearing in the cause of the petition.
Legal issues: Validation of interim special dividend declared by directors · Validation of deposits recorded as dividends in current accounts · Whether interest is payable on unclaimed dividends held in current accounts · Validation of director's bonus and net deposits in current accounts
Outcome: Validation order granted for the interim special dividend of $102 million; validation order granted in part for the deposits (limited to dividend-origin deposits recorded since 2001 in respect of four specified shareholders); validation refused in respect of interest, director's bonus (absent proof of general meeting approval), and pre-2001 net deposits.
Cites 1 case