Cinmedia Inc. v. Cinmedia Ltd

HCMP 1398/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1398 OF 2009

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BETWEEN

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AND

HCMP 1399/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1399 OF 2009

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____________

BETWEEN

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AND

HCMP 1400/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1400 OF 2009

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____________

BETWEEN

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(Heard Together)

Before: Hon Kwan J in Chambers

Date of Hearing: 21 August 2009

Date of Decision: 21 August 2009

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D E C I S I O N

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1.There are three applications before me seeking relief under sections 111(2) and 122(1B) of the Companies Ordinance, Cap. 32 to rectify the default by the directors of three companies in compliance with the statutory requirements in holding general meetings and laying before the general meetings the profit and loss accounts.

2.The applications are made by Cinmedia Inc. It is the sole shareholder of one of the companies in question, Cinmedia Limited (“Cinmedia”), and the major shareholder of the other two companies, EAR Media Limited (“EAR Media”) and SAR Media Limited (“SAR Media”).

3.Since 2000, Cinmedia, EAR Media and SAR Media are wholly owned by the ultimate holding company, Recruit Holdings Limited, which is a listed company in Hong Kong.

4.Cinmedia did not trade from its incorporation until December 2005. Since then it has been engaged in the advertising business. Prior to 2009, EAR Media was engaged in recruitment and non-recruitment publication and advertising business, and SAR Media was engaged in the business of providing computer, graphic and design services, publishing of magazines and advertising services. Since early 2009, EAR Media and SAR Media have changed their principal activity to investment holding.

5.The defaults were discovered in recent corporate compliance review carried out by each of these companies, made as part of a due diligence exercise on the group of companies of which they form part for possible spin-off listing purpose.

6.In the case of Cinmedia, its audited profit and loss accounts for the period from 26 July 2004, being its date of incorporation, to 31 December 2005, were not available until early 2007, so it was unable to present them at the annual general meetings in 2005 and 2006, which were held by shareholder’s resolutions in writing in lieu of a meeting. These two sets of audited accounts were laid and adopted in the annual general meeting held by a shareholder’s resolution in writing on 31 March 2007. Cinmedia was in default of compliance with section 122(1A) by which it is required to lay before it at an annual general meeting profit and loss accounts made up to a date falling not more than six months before the date of the meeting.

7.For EAR Media, it held its first annual general meeting on 23 October 1992, which was the deadline for such annual general meeting within 18 months of its incorporation on 23 April 1991.

8.However, this annual general meeting was adjourned because the audited accounts for the financial year ended 30 September 1992 were not available. Later, it held the adjourned first annual general meeting on 16 March 1993, when the audited profit and loss accounts for the year ended 30 September 1992 were laid and adopted.

9.So EAR Media was in default in holding its first annual general meeting within 18 months of incorporation pursuant to section 111(1) and in laying before it at the annual general meeting in 1992 the profit and loss accounts since its incorporation pursuant to section 122(1).

10.In respect of SAR Media, its profit and loss accounts for the period from date of incorporation on 4 June 1997 to 31 December 1998 were not laid and adopted by the company until its annual general meeting was held on 25 November 1999. It was in default in complying with section 122(1A) to lay before it at the annual general meeting profit and loss accounts made up to a date falling not more than nine months before the date of the meeting.

11.Further, no annual general meeting was held in 2002 for EAR Media and SAR Media, due to a change of some of the directors and change of management of these companies.

12.Subsequently, by resolutions in writing signed by all the shareholders of each of the two companies on 31 March 2003 in lieu of an annual general meeting, the audited profit and loss accounts for the financial year ended 31 December 2002 were laid and adopted by the companies at the annual general meetings.

13.The companies failed to comply with section 111(1) (and article 57(a) of the articles of association in the case of EAR Media) in holding an annual general meeting in 2002 and within 15 months after the preceding annual general meeting in 2001, and they failed to comply with section 122(1) in failing to lay before the annual general meeting in 2002 profit and loss accounts since the preceding accounts.

14.I am satisfied the above defaults were due to inadvertent oversight of the then directors, caused by their ignorance of the detailed requirements of the law or misconception of the statutory requirements. These were not due to wilful default.

15.I am also satisfied no prejudice had been occasioned to the shareholders and creditors of the three companies. The directors of the ultimate holding company, Recruit Holdings Limited, were at all times conversant with the financial position of each of these companies.

16.Measures have been taken by all three companies to ensure compliance of statutory requirements in future. Each has now employed a well qualified accountant with extensive secretarial experience to be its company secretary, and retained a reputable international accounting firm to be its auditors, to oversee its financial reporting and ensure future compliance.

17.The companies wish to rectify the defaults and comply with the law. The directors have given an assurance to the court to comply with the statutory requirements in future.

18.It is appropriate to exercise my discretion to grant relief. There would be an order in terms of the draft orders save as to the amendment of a date in the draft order in HCMP No. 1398 of 2009.

Miss Maria So, instructed by Messrs Tang & So, for the Plaintiffs in HCMP Nos. 1398, 1399 and 1400 of 2009

The Defendants in HCMP Nos. 1398, 1399 and 1400 of 2009, absent