Xdlong Investment Holding Ltd v. Hei Dai Lung Group Co Ltd
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HCMP 1027/2008 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 1027 OF 2008 ____________
____________ BETWEEN
____________ Before: Hon Kwan J in Chambers Date of Hearing: 26 June 2008 Date of Decision: 26 June 2008 _____________ D E C I S I O N _____________ 1.This application is taken out under sections 111(2) and 122(1B) of the Companies Ordinance, Cap. 32 in relation to Hei Dai Lung Group Company Limited (“the Company”). The application arose out of historical non-compliance with sections 111(1) and 122(1). The Company had not convened any annual general meeting since its incorporation in 2003 and no account was laid before the Company in any general meeting. 2.The application is made by Xdlong Investment Holding Limited, the plaintiff herein, as the sole member and director of the Company. It is supported by the past members and directors, Lin Shuipan and his wife, Madam Chen Xiayu, and the ultimate holding company, Xdlong International Company Limited (“XICL”). 3.The Company was originally established by Mr Lin and Madam Chen in Hong Kong in November 2003 for the purpose of holding various interests in subsidiaries which had been or were to be incorporated in China. From incorporation to 8 October 2007, Mr Lin and his wife were its sole shareholders, each holding 50% of the issued shares. On 8 October 2007, all the shares were transferred by them to the plaintiff, a company incorporated in the British Virgin Islands. To date, the Company has remained a direct subsidiary of the plaintiff. Through a series of transactions for corporate restructuring, the plaintiff has now become a wholly owned subsidiary of XICL, a company incorporated in the Cayman Islands, of which Mr Lin is the majority shareholder, chairman of the board and chief executive officer. 4.From November 2003 to September 2007, Mr Lin and his wife were the only directors of the Company. From September 2007 to present, the plaintiff is the sole director. 5.The business of the Company at all times is investment holding. It has no business operation other than holding two wholly owned subsidiaries in China, which are engaged in the manufacturing and sale of footwear, sports and leisure apparel and fashion accessories. 6.When Mr Lin set up the Company, he engaged a consultancy services company in China to assist him and through the consultancy services company, a professional service provider in Hong Kong was appointed the company secretary of the Company. Later, this service provider was replaced by another professional service provider company as the company secretary. Mr Lin and his wife are Mainland residents, they had little understanding of Hong Kong laws and had relied on the professional company secretary to deal with all corporate secretarial matters and to assist with the compliance of statutory requirements in Hong Kong. They had thought erroneously that as the Company did not have its own business operation, it would not be necessary for the Company to hold meetings or prepare accounts annually. 7.On 28 March 2008, XICL made an application to The Stock Exchange of Hong Kong Limited (“HKEx”) for the listing of its shares on the Main Board. HKEx raised questions on the non-compliance of the Company in respect of section 122. The Company retained legal advisers and investigated the extent of and reasons for non-compliance. Hence, this application is made. 8.I am satisfied that the non-compliance was inadvertent, caused by the ignorance of detailed requirements of the law and misplaced reliance on professional company secretarial services providers. It does not appear to me there is any wilful default. 9.The audited accounts of the Company from incorporation up to December 2007 have now been prepared and are ready to be laid before the Company in a general meeting to be ordered by the court. 10.No prejudice to shareholders or creditors would appear to have been occasioned, as during the relevant periods from 2003 to 2006, Mr Lin and his wife were the only shareholders and directors, they were also directors of the two subsidiaries of the Company. Thus, they had access to all financial documents and were conversant with the financial position of the Company and its subsidiaries. Further, Mr Lin was the only substantial creditor of the Company at all material times, so no prejudice would have been caused to any creditor of the Company. 11.The plaintiff has given its assurance to the court of compliance with statutory requirements in future. A qualified accountant with relevant experience has been appointed the company secretary for the Company in June 2008. Ernst and Young has been appointed as auditors of the group of companies headed by XICL, and will be responsible for preparation of audited financial statements. 12.Upon the successful listing of the shares of XICL, an audit committee would be established among the directors to ensure compliance with regulatory matters and corporate governance. 13.This is an appropriate case to exercise my discretion under section 111(2) and direct a general meeting to be called. I understand from counsel that the Company proposes to call a meeting today. This meeting would also be treated as the annual general meeting for 2008. 14.I therefore make an order in terms of paragraph (1) of the originating summons directing a general meeting of the Company to be held on the date hereof. I also make an order in terms of paragraphs (2) and (3) of the originating summons pursuant to sections 122(1B)(a) and (b), to allow the accounts of the previous years to be laid before the Company at the general meeting to be held and allow the audited accounts to be laid at a meeting that falls beyond nine months of the accounting year end. There are bona fide reasons to warrant the exercise of this power and I have credible assurances there would be compliance with statutory requirements in future.
Mr Godfrey Lam, SC, instructed by Messrs Simmons & Simmons, for the Plaintiff The Defendant : Hei Dai Lung Group Company Limited, absent |