In a judgment handed down on 6 March 2013, the Hong Kong High Court elaborated on the guiding principles the court will follow when determining whether or not it should exercise its 'exorbitant' jurisdiction to wind up an unregistered overseas company 'which prima facie is beyond the limits of territoriality'.
In Re Pioneer Iron & Steel Group Company Ltd (HCCW 322/2010) the Honourable Mr Justice Harris considered the Hong Kong winding-up petition brought by the BVI liquidators of Pioneer, which they had issued to avail themselves of the investigatory powers of a Hong Kong liquidator. Pioneer's sole shareholder, Ms Chen, had earlier instigated the voluntary liquidation of Pioneer in the BVI in circumstances where Pioneer faced significant claims from its creditors. The BVI liquidators issued the Hong Kong petition against Pioneer having formed the view that Ms Chen was not cooperating with the provision of documents and information in the BVI liquidation. Ms Chen subsequently sought to terminate the BVI liquidation by an application for a stay, which application failed. Ms Chen also opposed the Hong Kong petition brought by the BVI liquidators and issued, but did not serve, an application to strike out the petition. The parties then compromised in November 2010 in the appointment of Provisional Liquidators in Hong Kong in return for the strike-out application not being advanced. Upon learning in March 2012 of the subsequent inactivity in the Hong Kong liquidation since the appointment of Provisional Liquidators in November 2010, Harris J judicially intervened and restored the petition for hearing.Following his judgment in Re Yung Kee Holdings Ltd (HCCW 154/2010), Harris J confirmed the three core requirements that a petitioner seeking to wind up an unregistered company under Sections 326 and 327 of the Companies Ordinance must establish in order for the Hong Kong courts to have jurisdiction.
The three requirements are:
- There must be a "sufficient connection" with Hong Kong. Harris J suggested that it is not necessary to show that the company had an established business in Hong Kong. In Pioneer, there was a sufficient connection as the company had limited assets in Hong Kong, but more importantly the company's director and sole shareholder was resident in Hong Kong and had conducted the operation of the company from Hong Kong.
- There must be a "reasonable possibility that the winding-up order would benefit those applying for it". Harris J pointed out that while Pioneer was an unusual case in that there was already an ongoing liquidation of the company in the BVI (the company's jurisdiction of incorporation) and the hearing of the Hong Kong petition had been delayed such that, to a certain extent, it had been overtaken by time, the fact that a Hong Kong winding-up order would:
- allow the sole director to be the subject to a private or public examination under s.221 of the Companies Ordinance; and
- provide the liquidators with the opportunity to consider whether any action should be taken in Hong Kong for remedies that might not otherwise be available to the company,
led him to conclude that there was sufficient possibility of a benefit flowing from a Hong Kong winding-up order.
- The Court must be able to exercise jurisdiction over one or more persons interested in the distribution of the company's assets. This criterion was satisfied by the fact that the sole director and shareholder, herself a creditor of the company, was present in the jurisdiction.
In handing down his judgment, Harris J also made the following findings of practical importance:
- there is no reason why the grounds to be considered in a winding-up petition should be applied with less force where the company is also in liquidation in its home jurisdiction, even if the company itself is the petitioner in that petition and it would be desirable to obtain the assistance of the Hong Kong courts;
- in the event that the wrong party is named as petitioner, the Companies (Winding-Up) Rules or the Civil Procedure Rules may only be invoked to substitute another party as petitioner, or to correct the name (as opposed to the identity) of the petitioner.
- when applying for winding-up in Hong Kong the correct petitioner is the company, not its liquidators (if liquidators have been appointed in its home jurisdiction). Here the petition was brought in the name of the liquidators and Harris J found that they did not have standing to bring the winding-up petition, as the list of parties so entitled under s179 of the Companies Ordinance was exhaustive, but he did allow a creditor to be substituted as legitimate petitioner which meant that the petition could proceed.