GENG HUA ZHONG AND ANOTHER v. LI SHU HON AND ANOTHER

GENG HUA ZHONG AND ANOTHER v. LI SHU HON AND ANOTHER

Where a shareholder petition alleges the company is solvent and carrying on an active business, the court will grant a validation order for payments in the ordinary course up to a sensible monthly cap without requiring extensive financial disclosure; the petitioner must produce specific credible evidence of concern to justify further financial inquiry.

Citation
[2018] HKCFI 1041
Parties
1st Petitioner: Geng Hua Zhong; 2nd Petitioner: Li Jin Hu; 1st Respondent: Li Shu Hon; 2nd Respondent: T-Hero Industrial Company Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
30 April 2018
Case Number
HCCW403/2017
Procedural Posture
Companies Winding Up (just and Equitable) Petition Under S177(1)(f) Cap 32 / Application for Validation Order (interim) Heard in Chambers
Outcome
Validation order granted on the terms set out in the appendix; costs of the application to be paid out of the assets of the Company; no costs order between the 1st Respondent and the Petitioners.
Legal Topics
Validation Orders, Just and Equitable Winding Up, Solvency Requirement, Costs
Source Language
EN
Company Law Insolvency Law Civil Procedure Validation Orders Just and Equitable Winding Up Solvency Requirement Costs

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Parties

Geng Hua Zhong

1st Petitioner

Li Jin Hu

2nd Petitioner

Li Shu Hon

1st Respondent

T-Hero Industrial Company Limited

2nd Respondent

Procedural Posture

Companies Winding Up (just and Equitable) Petition Under S177(1)(f) Cap 32 / Application for Validation Order (interim) Heard in Chambers

Legal Issues

  1. 1 Whether a validation order should be granted for payments made in the ordinary course of business
  2. 2 What evidential burden a petitioner must meet to establish the company is solvent for a just and equitable winding up petition
  3. 3 Whether audited financial statements or further financial disclosure are necessary to support a validation order

Ratio Decidendi

Where a shareholder petition alleges the company is solvent and carrying on an active business, the court will grant a validation order for payments in the ordinary course up to a sensible monthly cap without requiring extensive financial disclosure; the petitioner must produce specific credible evidence of concern to justify further financial inquiry.

Court Disposition

Validation order granted on the terms set out in the appendix; costs of the application to be paid out of the assets of the Company; no costs order between the 1st Respondent and the Petitioners.

Orders

  • Payments or other dispositions of property made on or after 29 December 2017 in the ordinary course of the Company’s business are not void under s182 CWUO provided total payments do not exceed HK$1,000,000 in each calendar month.
  • Payments into or out of the Company’s bank accounts maintained with Bank A, Bank B and Bank C in respect of expenses/payments in the ordinary course of business are sanctioned.