Re Intelligence Link Ltd
Read the full judgment text of HCMP 1435/2013 on BabelCite. This High Court CFI judgment was delivered on 28 October 2013.
1. This is an application by Intelligence Link Limited (“the company”) for relief pursuant to section 122 of the Companies Ordinance.
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HCMP 1435/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1435 OF 2013 ____________
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_______________ J U D G M E N T _______________ 1.This is an application by Intelligence Link Limited (“the company”) for relief pursuant to section 122 of the Companies Ordinance. Introduction 2.It would be opportune to say a few words about applications for relief under section 122 of the Ordinance. 3.As is generally the case with applications of this nature, but for due diligence undertaken for an impending or potential listing on the Stock Exchange of Hong Kong Ltd (“SEHK”), past non-compliance with the statutory requirements of the Ordinance such as section 122 would probably not have come to light. The desire to regularize non-compliance so as not to jeopardize the prospects of a successful listing on the SEHK has prompted court applications of which the present application is an example. 4.Invariably, such applications are unopposed. All too often, the evidence is found wanting in various respects because of inadequate and/or careless preparation on the part of those responsible for making the application, resulting in extensive judicial time having to be spent in identifying the deficiencies. 5.This would not appear to be a proper use of judicial time. In my view, the applicant has a duty to assist the court by ensuring that all necessary evidence is before it. In this connection, the applicant has to have in mind the applicable legal principles and thus the nature of the evidence that needs to be adduced. 6.The applicable legal principles are now well established: see for example Re Sanliuyidu (Hong Kong) Sports Goods Co Ltd [2009] 4 HKLRD 708 at § 5 which states the factors to which the court would have regard when deciding whether or not the discretion should be exercised:
7.Where there have been changes in share ownership, the importance of correctly identifying the defaulting period(s) cannot be over emphasised. It enables the applicant to focus on the identity of the affected shareholders and of the relevant directors during the period(s) of default. In such cases, the evidence needs to address, inter alia, the following matters:
Breaches of Section 122 8.I now turn to consider the breaches of section 122 that have given rise to present application. 9.The application is supported by 4 affirmations by Chan Kuong Ian (“Mr Chan”) a director of the company since 2 October 2007. The 3rd affirmation was filed after the first hearing on 5 September 2013 at which the court raised various queries concerning the supporting documentation and the 4th affirmation was filed after the adjourned hearing on 7 October 2013. 10.It transpires that minutes of an AGM that had been convened in error had been exhibited. Those minutes had caused much of the initial confusion. That apart, considerable additional evidence has now been filed to support the application, supplementing what clearly previously had been inadequate. 11.The company was incorporated on 3 May 1994. In breach of the requirements of section 122 (1) and (1A) of the Ordinance, the profit and loss accounts of the company for the period from incorporation in May 1994 to 31 December 2012 had not been laid before the company at its AGMs until the 2013 AGM held on 8 July 2013. The defaulting years thus ran from 1995 to 2012 (inclusive). 12.Since its incorporation, other than holding investments in PRC subsidiaries, the company has not engaged in any active business. Apart from dividend income received from its operating subsidiaries in the PRC, it receives bank interest. None of the income received attracts tax in Hong Kong. 13.Notwithstanding breaches of section 122, there is evidence to the effect that its main PRC subsidiary (Zhongshan Lonwalk Mould Plastic Co Ltd) acquired in about the year 2000 had prepared and submitted audited accounts to the shareholders of the company for their review annually. 14.The company’s authorized share capital on incorporation was $10,000, divided into 10,000 shares of $1 each. Until an allotment of 9998 shares made on 10 April 2010, only two shares had been issued. 15.Its shareholders during the defaulting years were as follows:
16.Consent letters have now been obtained from all affected shareholders other than Toply (considered separately below) which was wound up on 3 August 2011 and dissolved on 31 October 2012. So far as consent from corporate shareholders is concerned, their respective current directors have signed consent letters. As noted earlier, audited accounts had been sent to shareholders annually by the company’s main operating subsidiary. Accordingly, from about 2000, the shareholders would have been apprised of its performance and, indirectly, the likely financial condition of the company. 17.Toply was one of two shareholders of the company during the period from incorporation of the company in May 1994 until May 2004 ("the relevant period"), with Mr Lee and Toply each holding one of the issued shares of the company. Toply, in turn, also had 2 shareholders, namely, Orientek Ltd and Mr Lee, each holding 5000 shares. 18.The annual returns of Toply show that on incorporation, Toply had 4 directors: Mr Lee, Chen Jianren ("Mr Chen"), Yeung Lam Seng and Zheng Daoci. The following table derived from the annual returns of Toply shows the directorships and records changes in directorship. All the annual returns were dated 17 August of the relevant year:
19.Mr Chen was a director from inception until his resignation on 29 November 2002 and Mr Lee was a director throughout the relevant period. In the case of Mr Lee, not only was he a director throughout the relevant period, he was also beneficially interested and a registered shareholder in both Toply and the Company. 20.Mr Chen and Mr Lee as past directors of Toply have recently confirmed in writing that as directors of Toply they were conversant with the financial position of the company including the acquisition and/or disposal of the investments by the company as stated in the financial reports of the company which they have been shown for the period from incorporation to 31 December 1994 and for the 10 subsequent years. 21.On the basis of that evidence I am now satisfied that like the other affected shareholders, Toply was aware of the Company's financial position throughout the period of default. 22.As Mr Chan only became a director of the company on 2 October 2007, he has spoken to Mr Lee and Mr Chen who were directors from the date of incorporation until 24 March 2004 and to Si Tu Jie Dan who was appointed a director on 24 March 2004 and continues to hold such office to ascertain from them the reasons for non-compliance. 23.Mr Chan's evidence sets out those reasons:
24.Pausing here, the first and second reasons advanced for non-compliance are regrettably all too familiar. It seems that a number of those in the business of providing secretarial services appear to lack professionalism. As to the fourth reason, I would observe that persons who assume such office have a duty to acquaint themselves with their responsibilities and duties as directors. 25.Now that past breaches have been brought to their attention, the company's current directors realise the need and importance of future compliance. The evidence is that if the proposals for listing prove to be successful new directors who have received training from the company's solicitors regarding corporate secretarial obligations would be appointed to replace the existing directors. The company is currently seeking a suitable replacement for AASS. Once in place, the new directors and the new company secretary together should be in a position to ensure that breaches of the statutory provisions do not recur. 26.The directors have caused annual audited financial statements to be prepared for the defaulting period. The company held its 2013 AGM on 8 July 2013 at which the audited financial statements for the year ended 31 December 2012 were laid before the company and presented to the shareholders. On the same occasion, by way of resumed AGMs for the years 1995 to 2012, the other audited financial statements were also laid before the company and presented to the shareholders. 27.Having regard to the evidence filed, I am satisfied that the contraventions have been inadvertent and not wilful. I am further satisfied that adequate steps had been taken to ensure future compliance with the statutory provisions. 28.Accordingly, I will make an order in terms of the draft order submitted which incorporates what may be referred to as the "Asiafair" undertaking. The applicant will procure that the order and the reasons why it was sought to be brought to the attention of the Stock Exchange of Hong Kong Limited in connection with the proposed listing of any company of which the applicant is a subsidiary and is referred to in any prospectus is such listing. See Head Park Group Ltd v Asiafair International Ltd. [2011] HKC 63.
Mr Henry Cheng Hon Gi, instructed by M/s Anthony Siu &Co, for the applicant |
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