Case Document

100%Judiciary

HCMP 1445/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1445 OF 2013

____________

	IN THE MATTER of ASIATIC CENTURY LIMITED
	and
	IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	PRIME SUNLIGHT LIMITED	Applicant
and
	ASIATIC CENTURY LIMITED	Respondent

____________

AND

HCMP 1446/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1446 OF 2013

____________

	IN THE MATTER of BEST SEASON CORPORATION LIMITED
	and
	IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

________________________

BETWEEN
	PRIME SUNLIGHT LIMITED	Applicant
and
	BEST SEASON CORPORATION LIMITED	Respondent

____________

AND

HCMP 1447/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1447 OF 2013

____________

	IN THE MATTER of CHEERFUL RAISE LIMITED
	and
	IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	DOUBLE REACH LIMITED	Applicant
and
	CHEERFUL RAISE LIMITED	Respondent

____________

AND

HCMP 1448/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1448 OF 2013

____________

	IN THE MATTER of CLUB KINGDOM THE CENTRAL GROUP LIMITED
	and
	IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	BEST FUTURE WORLDWIDE LIMITED	Applicant
and
	CLUB KINGDOM THE CENTRAL GROUP LIMITED	Respondent

____________

AND

HCMP 1449/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1449 OF 2013

____________

IN THE MATTER of DRAGON PRAISE LIMITED

and

IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	BEST FUTURE WORLDWIDE LIMITED	Applicant
and
	DRAGON PRAISE LIMITED	Respondent

____________

AND

HCMP 1451/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1451 OF 2013

____________

IN THE MATTER of EASE GOAL MANAGEMENT LIMITED

and

IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	BEST FUTURE WORLDWIDE LIMITED	Applicant
and
	EASE GOAL MANAGEMENT LIMITED	Respondent

____________

AND

HCMP 1452/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1452 OF 2013

____________

IN THE MATTER of EASY LARGE LIMITED

and

IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	BEST FUTURE WORLDWIDE LIMITED	Applicant
and
	EASY LARGE LIMITED	Respondent

____________

AND

HCMP 1453/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1453 OF 2013

____________

IN THE MATTER of HONOR LEGEND LIMITED

and

IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	CORAL SPRING INVESTMENTS LIMITED	Applicant
and
	HONOR LEGEND LIMITED	Respondent

____________

AND

HCMP 1456/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1456 OF 2013

____________

IN THE MATTER of JOYFUL GREEN LIMITED

and

IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	PRIME SUNLIGHT LIMITED	Applicant
and
	JOYFUL GREEN LIMITED	Respondent

____________

AND

HCMP 1457/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1457 OF 2013

____________

IN THE MATTER of JOYFUL MERCY LIMITED

and

IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	BEST FUTURE WORLDWIDE LIMITED	Applicant
and
	JOYFUL MERCY LIMITED	Respondent

____________

AND

HCMP 1458/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1458 OF 2013

____________

IN THE MATTER of OCEAN AMPLE INVESTMENT LIMITED

and

IN THE MATTER of Sections 111 and 122 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

____________

BETWEEN
	CORPORATE HERO LIMITED	Applicant
and
	OCEAN AMPLE INVESTMENT LIMITED	Respondent

____________

(HEARD TOGETHER)

Before: Hon Harris J in Chambers

Date of Hearing: 25 September 2013

Date of Decision: 28 October 2013

________________

D E C I S I O N

________________

Introduction

1.I have before me 11 originating summonses issued pursuant to sections 111(2), (3) or 122(1B) of the Companies Ordinance for orders curing failures by 11 companies to hold annual general meetings within the time period prescribed by the Ordinance or to lay before the relevant company in general meeting a profit and loss account or income and expenditure account for the relevant period. There have been two hearings before me: on 10 and 25 September 2013. On each occasion the applicants were represented by Mr Jurgen Lau of the applicants’ solicitors Li & Partners.

2.Each of the 11 companies is an indirect subsidiary of a company incorporated in the Cayman Islands called Love Night Clubbing Holdings Limited (“LNC”). It is intended to list LNC on the main board of The Stock Exchange of Hong Kong Limited (“Stock Exchange”). The breaches of sections 111 and 122 came to light during the course of a due diligence exercise carried out for the purposes of the listing. I was told, although only in very general terms, that the relevant Stock Exchange rules require confirmation that at the time of the application for listing the company applying for listing, and I assume its subsidiaries, are not in breach of the provisions of the Companies Ordinance. Applications of this sort have become increasingly frequent recently. During the course of the week in which these 11 applications were heard there were 10 other originating summonses for similar orders heard by myself of Mr Justice Godfrey Lam.

3.I shall deal first with the requirements of sections 111 and 122 and the circumstances in which the Companies Court has on previous occasions granted orders of the type sought in the present cases. I will then deal with the applications before me.

The Law

4.Section 111(1) and (2) provides:

“(1) Every company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it; and not more than 15 months, or such longer period as the Registrar may in any particular case authorize in writing, shall elapse between the date of one annual general meeting of the company and the next:

Provided that, so long as the company holds its first annual general meeting within 18 months of its incorporation, it need not hold it in the year of its incorporation or in the following year.

(2) If default is made in holding a meeting of the company in accordance with subsection (1), the court may, on the application of any member of the company, call, or direct the calling of, a general meeting of the company and give such ancillary or consequential directions as the court thinks expedient, including directions modifying or supplementing, in relation to the calling, holding and conducting of the meeting, the operation of the company's articles, and including a direction that 1 member of the company present in person or by proxy shall be deemed to constitute a meeting.”

5.In broad terms section 111(1) requires a company to hold a general meeting every calendar year. If a company defaults it, and each of its officers, is liable to a level 5 fine, which currently is a maximum of $50,000: see sub-section (5) and the twelfth schedule. Sub‑section (2) gives the court a discretion to grant an order curing a breach of sub‑section (1).

6.Section 122(1), (1B), (2) and (3) provide:

“(1) Subject to subsection (1B), the directors of every company shall lay before the company at its annual general meeting a profit and loss account or, in the case of a company not trading for profit, an income and expenditure account for the period, in the case of the first account, since the incorporation of the company, and, in any other case, since the preceding accounts. (Replaced 10 of 1987 s. 4)

(1B) The court, if for any reason it thinks fit so to do, may in the case of any company and with respect to any year –

(a) substitute for the requirement in subsection (1) to lay a profit and loss account or (as the case may be) an income and expenditure account before the company at its annual general meeting a requirement to lay such account before the company at such other general meeting of the company as the court may specify; and

(b) extend the periods of 6 and 9 months referred to in subsection (1A). (Added 10 of 1987 s. 4)

(2) The directors shall cause to be made out in every calendar year, and to be laid before the company at its annual general meeting or at such other general meeting of the company as may be specified by the court under subsection (1B), a balance sheet as at the date to which the profit and loss account, or the income and expenditure account, as the case may be, is made up. (Amended 10 of 1987 s. 4; L.N. 245 of 1987)

(3) If any person being a director of a company fails to take all reasonable steps to comply with the provisions of this section he shall, in respect of each offence, be liable to imprisonment and a fine: (Amended 7 of 1990 s. 2)…”

7.Section 122(1) and (2) requires a company to put before its members at an annual general meeting convened in accordance with section 111(1) its profit and loss account (or income and expenditure statement) and balance sheet for the financial year ending either immediately preceding the calendar year in which the annual general meeting takes places or during it. In the case of the latter it is commonly 31 March. There is an exception. Section 344A provides a regime for a company which is dormant to pass a resolution to that affect and exempt itself from the requirements of sections 111 and 122.

8.Sub-section (3) provides that if any director of a company fails to take all reasonable steps to comply with the provisions of the section he shall be liable to imprisonment of 12 months and a fine of $300,000. The only case of which I am aware of a prosecution for contravention of sections 111 or 122 is R v Lo Hon Yiu Henry [1985] 1 HKC 183, which was a prosecution of directors for breach of section 122(1) and (3). Commonly default in complying with section 111(1) goes hand in hand with default in complying with section 122(1).

9.The Companies Court has granted orders extending time under sections 111(2) and 122(1B) in various situations. In Sino-i.com Limited[1] Yuen J granted an order under section 122(1A) extending time for laying the profit and loss account and balance sheet before the company in annual general meeting on the application of the company’s directors on the grounds that due to an expansion of business in the Mainland the audited financial statement would not be ready in time to comply with the statutory time period. The application was not made retrospectively, it was made in advance. In Wellko Industrial Limited[2] Yuen J extended time under both sections 111(2) and 122(1B) in respect of annual general meetings for 1999 and 2000 and the presentation of financial statements for the financial years 1998 and 1999 (the financial year ending on 31 December) until 8 January 2001. Annual general meetings had not been called by the directors because of a dispute between the shareholders of the company. Yuen J took the view that the applications should be acceded to primarily because both shareholders wanted annual general meetings to take place and for the position to be regularised. In Wellko Industrial Limited the delays were short and there was an identifiable reason why the error had been made; it was not simply an indifference to proper corporate governance.

10.In Hong Kong Shooting Association[3] applications had become necessary under section 111(1), 122(1B) and 114B because the company was not able to conduct a meeting as it only had 1 member and a quorum could not be achieved resulting in the statutory time periods expiring. I took the view that there was an identifiable reason why sections 111(1) and 122(1) had not been complied with and it was an appropriate case in which to exercise the court’s discretionary jurisdiction to extend time.

11.In 2008, when sitting as a Deputy Judge, I gave judgment in HKI Properties Limited[4] a case concerning failure to comply with section 122(1). I said this:

“7 The court has a discretion to grant extensions of time for the laying of profit and loss accounts or income and expenditure statements before a company’s general meeting “for any reason it thinks fit”: Re Chiyu Banking Corporation Limited HCMP 2832/2002, 1 August 2002, per Kwan J. at §5.

8. The court has exercised such power to regularize non‑compliance which has occurred continually for periods as long as 10 years: Re Artini International Company Limited & Others HCMP 2065, 2067, 2068, 2069, 2071, 2072/2007, 16 November 2007, per Kwan J. at §§9-12; Re Ta Yang Silicone Rubber Industrial Company Limited & Others HCMP 446-448/2007, 27 March 2007, per Kwan J. at §§6-14.

9. The above cases demonstrate that the type of factors to which the court has regard in considering whether to regularize non-compliance with section 122(1) include:

(1) Whether the shareholders were aware of the financial position of the company in question and thus were not prejudiced by non-compliance;

(2) Whether the default was inadvertent; and

(3) Whether the court was satisfied that the company would comply with the obligation to lay its profit and loss accounts or income and expenditure statements before general meetings in future.

10. I am satisfied in the case of each of the companies which are the subject of the applications before me that the shareholders have not been prejudiced, the default was inadvertent and that now the directors are alive to the companies’ obligations they will comply with them in the future.”

12.In that case failure to comply with section 122(1) arose as follows. The 7 companies the subject of the applications all carried on business in the Mainland and did not have to file tax returns in Hong Kong. The group financial controller believed that this being the case it was not necessary for the companies to prepare audited financial statements. In July 2007 a new financial controller was appointed who appreciated that this was wrong and informed the directors. The companies thought it was desirable to apply retrospectively to cure the errors. Having regard to the factors referred to in paragraph 9 of the passage from the judgment quoted above I took the view that the court should exercise its discretion and grant the orders sought. The mistake had been identified by the companies’ management and they were acting responsibly in seeking to rectify the error.

13.In Sanliuyidu (Hong Kong) Sports Goods Limited[5] the company had not prepared audited accounts or convened annual general meetings since its incorporation in 2004. It sought an order extending time until 16 June 2009 for laying accounts before the company in general meeting for periods ending 30 June 2005, 2006, 2007 and 2008. The company also sought an order under sections 111(2) and 111(3) that written resolutions dated 16 June 2009 be deemed to be annual general meetings for the years 2005 to 2008. The company was a holding company with one shareholder and one director. It held the entire issued capital of a company incorporated in the Mainland (“361 China”) which, I assume from the judgment, in turn owned various operating companies through which the group’s sportswear business was carried out. The infringements came to light during the due diligence for a proposed listing of the group. As matters transpired the company transferred its entire interest in 361 China to another company and it formed no part of the listing. 361 China itself had been complying with the relevant Mainland laws and regulations. Kwan J took the view that the factors referred to in HKI Properties Limited to which I have referred above were satisfied and that it was a proper case in which to grant the orders sought.

14.In 2010 the Companies Court, so far as I am aware, first head an application pursuant to sections 111(2) and 122(1B) by a subsidiary of a company which it was proposed to have listed on Stock Exchange. In Head Park Group Ltd v Asiafair International Ltd [6]12 companies applied for orders under sections 111(2) and 122(1B) in respect of a failure to convene annual general meetings and lay their accounts before the company in general meeting for two recent years, namely, 2008 and 2009. I was satisfied that the criteria I referred to in HKI Properties Limited were satisfied and I was prepared to exercise the court’s discretion and grant the necessary orders on the companies undertaking “to procure that this order and the reasons why it was sought have been brought to the attention of The Stock Exchange of Hong Kong Limited in connection with the proposed listing of Fine Profits Enterprises Limited or any other company of which the Applicant is a subsidiary and is referred to in any prospectus for such listing”.

15.My impression is that the lawyers for the 11 companies who are the subject of the present applications have assumed that if they file simple affirmations stating that the failure to comply with the Ordinance was inadvertent, each companies’ single corporate shareholder has not been prejudiced and the mistakes will not be made again, the court would grant the orders almost as a matter of routine. I am told that other applications have recently been made which betray a similarly casual approach. This is to misunderstand the authorities and the way in which the court will approach the exercise of its discretion.

16.The authorities to which I have referred demonstrate that the court will normally grant orders if it is satisfied that a genuine mistake has been made which has not caused any prejudice to the owners of a company. An example of a genuine mistake is a belief that if a company does not need to file a tax return, which is commonly the position for Hong Kong companies that carry on business exclusively on the Mainland and thus have no taxable income here, it does not need to prepare accounts that satisfy section 123 and consequently does not need to put them before the company in annual general meeting. Indifference to compliance with sections 111(1) and 122(1) by a group of companies is a rather different matter and does not, or not necessarily, fall within the kind of breach which in paragraph 9(2) of HKI Properties Limited I describe as “inadvertent”.

17.The court will also have regard to the length and extent of the delay. Orders will be more readily be granted if an application is made for an extension of the relevant time period in advance. A retrospective order requires more compelling justification. The court will have regard to why the order is sought and the extent to which granting an order would be artificial because, for example, a very long time has elapsed, the shareholders of the company have changed and there is no prospect of the breach being prosecuted. Remedying a breach in order to progress a proposed listing may be a reason for the court to exercise its discretion, but it is not automatically so. The fact that a breach only comes to light as a result of a due diligence exercise undertaken by a third party and relates to a large number of companies is a reason for the court to scrutinise such applications carefully not to treat them more leniently. If the breaches are extensive and there is no real explanation for them the applications are likely to be refused.

The Present Applications

18.I now turn to consider the 11 originating summonses before me. In an appendix to this judgment I have set out the material parts of the orders sought in each originating summons. I shall start with the originating summons issued first in time, namely, HCMP 1445 of 2013. The Respondent is Asiatic Century Limited (“Asiatic”).

19.Asiatic is owned by Prime Sunlight Limited (“Prime Sunlight”), which is incorporated in the British Virgin Islands. It has one director, namely, Wong Hei Yan. Prime Sunlight is owned by another BVI incorporated company, New Pride Corporate Limited (“New Pride”), which is in turn a wholly owned subsidiary of LNC.

20.Mr Wong says in paragraph 11 of his first affirmation in support of this originating summons that he was the owner of Asiatic until 28 March 2013 when he transferred his shareholding to Prime Sunlight. It was unclear from his first affirmation whether or not he was the beneficial owner of Asiatic or LNC. I asked Mr Lau at the first hearing and rather surprisingly he could not tell me. I adjourned the first hearing in order that this and further information about the activities of the companies be provided in the form of a further affirmation. In Mr Wong’s second affirmation he explains that LNC is beneficially owned by Yip Mow Lum who is the chairman, executive director and controlling shareholder of Bright Smart Securities & Commodities Group Limited, a company listed on the main board of the Stock Exchange. Mr Wong does not explain whether LNC was the ultimate beneficial owner of the shares of Asiatic registered in his name prior to 28 March 2013. I assume it was.

21.The originating summons seeks the following orders:

“Prime Sunlight Limited (Applicant) and Asiatic Century Limited (Respondent) for an order that:

(1) A general meeting of the Respondent to be held on or before 30 September 2013 shall be deemed to be the annual general meeting of the Respondent for the years of 2011 and 2012;

(2) The period specified in Section 122(1A) of the Companies Ordinance for laying the accounts of the Respondent at its annual general meeting (including the profit and loss accounts and the balance sheets) for the period from 3 December 2010 to 31 March 2012 (the “Accounts”) be extended until 30 September 2013;

(3) The Accounts be laid at the said general meeting of the Respondent to be held on or before 30 September 2013.”

22.Mr Wong explains in his first affirmation that “the principal activity of the Company was providing management services including holding necessary licences and signing relevant contracts to facilitate the operation of clubs in Lan Kwai Fong. As the Company itself did not carry out any active trading business, I mistakenly thought that no audited accounts needed to be prepared and no annual general meetings, which in my eyes are generally convened mainly for approving audited accounts, would thus be required.” He goes onto say that he was not familiar with the Companies Ordinance and did not know that a company without an active trading business must hold annual general meetings and prepare and put before the company in annual general meeting those accounts for consideration and approval. He also says that no prejudice has been caused to shareholders and that the mistake would not be repeated now that Asiatic was aware of the requirements of sections 111(1) and 122(1).

23.The material parts of the affirmations filed in support of the other ten originating summonses are in almost identical terms. The exception in the affirmation filed in HCMP 1448/2013 in which the Respondent is Club Kingdom The Central Group Limited, which states in paragraph 7 that it held trademarks. Paragraph 7 of each of the other supporting affirmation says either that the relevant company provided “management” or “administrative services” and describes those services in very general terms and does not identify in respect of which club the services were provided. As I have already mentioned I adjourned the first hearing of the originating summonses in order that further information could be provided about the activities of each company as well as their beneficial ownership.

24.Mr Wong filed a second affirmation in HCMP 1445/2013 (Asiatic) which was intended to provide all the information sought in respect of each of the ten companies. Mr Wong explains that the group operates three clubs in Lan Kwai Fong, namely, Beijing Club, Billion Club and Magnum Club. Beijing Club and Magnum Club are operated by Sure Wise Investment Limited (“Sure Wise”), which is incorporated in Hong Kong and is owned by Best Future Worldwide Limited, the Applicant in HCMP 1457/2013. Billion Club is operated by Kind Legend Limited, which is incorporated in Hong Kong, and is owned by Coral Spring Investments Limited, the Applicant in HCMP 1453/2013.

25.Mr Wong explains in his 2^nd affirmation that Asiatic holds the light refreshment restaurant licences, water pollution control licence and place of public entertainment licence for Magnum Club. In paragraphs 14 and 15 of his second affirmation Mr Wong explains:

“14. The Group believed it was not uncommon to use different companies to serve particular administrative functions of a group and such arrangements for administrative operations as described in paragraphs 9 to 13 above could provide various commercial benefits, such as clear delineation of the administrative functions, administrative convenience to facilitate daily operation and minimize the risk of operating entity from any possible contractual dispute relating to particular administrative services.

15. Since the Respondents in the 11 applications only provide administrative services to the Group, their expenses and costs in relation to the provision of such services to the Group are borne and paid by the Group.”

26.It is apparent from this evidence that Asiatic had an active role in relation to the operation of Magnum Club. I assume, although it is not expressly stated in the evidence, that Sure Wise received the revenue generated by Magnum Club and prepared financial statements for auditing and submission to the Inland Revenue along with Sure Wise’s tax return. Presumably Sure Wise’s auditors knew that related companies were signing licenses and signing contracts for goods and services used to generate Sure Wise’s revenue and profit. For example, Mr Wong says that Easy Large Limited (“Easy Large”) signed the contracts for purchasing beverages and other items including advertising, maintenance and internet services. Easy Large is the Respondent in HCMP 1452/2013. Easy Large was incorporated in February 2011 and has never convened an annual general meeting nor, prior to this application, prepared the accounts required by sections 122 and 123. There is no explanation as to how the accounts prepared for Sure Wise came to be prepared and how the auditors and management of Sure Wise came to overlook the requirement to prepare accounts for the companies carrying out activities in connection with its operations. Mr Wong has not exhibited the financial statements of any of the relevant companies to his affirmations.

27.In paragraph 14 of his 2^nd affirmation Mr Wong gives a very general explanation of why the three Clubs operated using a relatively large number of companies, which, including Sure Wise and Kind Legend, total thirteen. Mr Wong does not tell the court who in the “Group”, which presumably means LNC, had the belief that this is a common practice and what discussions took place concerning what such an arrangement involved in terms of accounting and administration. It is also a little difficult to see how the use of multiple companies provided much administrative convenience in relation to daily operations if their activities were not such as to require the preparation of accounts. What is more convincing is the reference in paragraph 14 to distancing the revenue earning company from possible claims from suppliers. However, if the companies had liabilities to suppliers and service providers it would seem to follow that they received payments from another member of the group, most likely Sure Wise or Kind Legend, and in turn made payments to the providers of goods and services. If this is the case, it is difficult to reconcile satisfactorily with paragraph 8 of Mr Wong’s first affirmation which contains his explanation for not preparing audited accounts: “However, I did not know that a company without any active trading business must also hold the annual general meeting and prepare and lay audited accounts at each annual general meeting before the company under the law” (emphasis added).

28.The appendix to this judgment identifies the applicants in each originating summons, which is the immediate owner of the company subject to the application. Each of the immediate owners is a BVI incorporated company. Each of those companies is in turn owned by New Pride which is also incorporated in the BVI. This is a sophisticated structure. Mr Yip, the ultimate beneficial owner of the companies, is the major shareholder of a listed securities company and it seems reasonable to assume that an informed decision was made by him or his senior staff to adopt this structure. I would have expected those taking such a decision to have some familiarity with corporate governance certainly to the extent of ensuring that professionals be engaged to advise on what such a structure involved in terms of rules and regulations.

29.As can be seen from the appendix the extent of the non‑compliance with sections 111(1) and 122(1) varies in each case. However, the evidence filed in respect of each originating summons is nearly identical and the types of error and the explanations for them are for all practical purposes the same. It seems to me that the originating summonses fall to be considered together given their common background.

Conclusion

30.I am not satisfied that the breaches of the Ordinance arise from what can fairly be characterised as “inadvertence”. My impression is that the breaches are more likely to be explained by indifference and quite possibly the assumption that the requirement to prepare audited accounts and the attendant costs could be avoided.

31.I take into account the fact that refusing the applications may have an effect of LNC’s proposed listing, but I have not been told what this would be and it does not seem to me that it is a reason of itself to grant an order that should otherwise be refused.

32.I do not consider that it is appropriate to exercise the court’s discretion to grant the orders sought in the originating summonses and I, therefore, dismiss them.

33.I would note for the benefit of practitioners that applications under sections 111(2) and 122(1B) should not be assumed to be a formality. Particularly when dealing with multiple retrospective applications careful thought needs to be given to the justification for seeking the order and the applications should be presented in a manner which assists the court considering them.

	(Jonathan Harris)
	Judge of the Court of First Instance
	High Court

Mr Jurgen Lau, of Li & Partners, for the applicants (in all cases)

The Respondent (in HCMP 1445/2013): Asiatic Century Limited, was not represented and did not appear

The Respondent (in HCMP 1446/2013): Best Season Corporation Limited, was not represented and did not appear

The Respondent (in HCMP 1447/2013): Cheerful Raise Limited, was not represented and did not appear

The Respondent (in HCMP 1448/2013): Club Kingdom The Central Group Limited, was not represented and did not appear

The Respondent (in HCMP 1449/2013): Dragon Praise Limited, was not represented and did not appear

The Respondent (in HCMP 1451/2013): Ease Goal Management Limited, was not represented and did not appear

The Respondent (in HCMP 1452/2013): Easy Large Limited, was not represented and did not appear

The Respondent (in HCMP 1453/2013): Honor Legend Limited, was not represented and did not appear

The Respondent (in HCMP 1456/2013): Joyful Green Limited, was not represented and did not appear

The Respondent (in HCMP 1457/2013): Joyful Mercy Limited, was not represented and did not appear

The Respondent (in HCMP 1458/2013): Ocean Ample Investment Limited, was not represented and did not appear

Appendix

1. HCMP1445/2013

Prime Sunlight Limited (Applicant) and Asiatic Century Limited (Respondent) for an order that:

(1) A general meeting of the Respondent to be held on or before 30 September 2013 shall be deemed to be the annual general meeting of the Respondent for the years of 2011 and 2012;

(2) The period specified in Section 122(1A) of the Companies Ordinance for laying the accounts of the Respondent at its annual general meeting (including the profit and loss accounts and the balance sheets) for the period from 3 December 2010 to 31 March 2012 (the “Accounts”) be extended until 30 September 2013;