Winding-up – Jurisdiction to wind up unregistered foreign companies – Companies Ordinance (Cap 32) s 327

RE BEAUTY CHINA HOLDINGS LTD [2009] 6 HKC 351

Court of First Instance
Companies (Winding-Up) No 364 of 2009
Kwan J
7 September 2009

Linda Chan (Baker & McKenzie) for the petitioners.
Adrian Lai (Peter Lau & Co) for the Company.
Tsang Chan & Wong for the supporting creditor, absent.
Vivian Yeung for the Official Receiver.

The respondent company (the Company) was incorporated in the Cayman Islands and was not registered under Part XI of the Companies Ordinance (Cap 32). It was an unregistered company within the meaning of s 326 of the Ordinance. A creditor’s petition to wind-up the Company was presented by a syndicated group of lenders comprising among others Industrial and Commercial Bank of China (Asia) Ltd (ICBC Asia). ICBC Asia was the successor agent of a term loan facility (the loan agreement)
in the sum of HK$135 million. The Company opposed the petition. One of the grounds of opposition was that the Hong Kong court should decline
to exercise its winding-up jurisdiction against a foreign company.

Held, ordering the winding-up of the company:

The court had jurisdiction to wind-up an unregistered company by the power conferred in s 327(1) of the Ordinance. The core requirements for exercising this jurisdiction to wind-up an unregistered company were: (i) there had to be a sufficient connection with Hong Kong, but this did not necessarily have to consist in the presence of assets within the jurisdiction; (ii) there must be a reasonable possibility that the winding-up order would benefit those applying for it; and (iii) the court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets.

There was no dispute that requirement (iii) was satisfied here.

As regards requirement (i), it must be borne in mind that the Company was an investment holding company. It did not directly carry out any manufacturing or trading activity. It had a number of wholly-owned subsidiaries incorporated in the British Virgin Islands, Macau, Hong Kong, the PRC and Samoa and some of these subsidiaries were engaged in the manufacturing and trading of cosmetic products. On the evidence, the Company had maintained an office in Hong Kong and had carried on business at such office. Further, the governing law of the Loan Agreement was Hong Kong law and the Company agreed that any legal action or proceedings arising out of or relating to the Loan Agreement might be brought in the courts of Hong Kong and it irrevocably submitted to the non-exclusive jurisdiction of the Hong Kong courts. On the evidence, the Company had sufficient connection with Hong Kong to justify the Hong Kong court setting in motion its winding-up procedures and the core requirement (i) was satisfied.

As regards requirement (ii), Colour Zone HK, an indirect wholly owned
subsidiary of the Company, had a wholly owned subsidiary in the PRC, Zhuhai Handsome Jingxi Cosmetics Technology Development Company
Ltd, with the paid-up share capital of HK$20 million, and it was engaged in
the principal activities of the provision of technology support, quality control and marketing services. It also had among its current assets amounts due from fellow subsidiaries of approximately HK$6.3 million. It had cash and cash equivalents of approximately HK$1.6 million. The Company was not virtually worthless. The fact that the liabilities of the subsidiary exceeded its assets did not mean that there was no prospect of some recovery for creditors of Colour Zone HK.

The significant subsidiary of the Company according to the 2008 annual
report was a company in Zhuhai engaged in the manufacturing of cosmetics skin care products with a registered capital of HK$70 million. In
view of the proximity of Hong Kong to Zhuhai City and that there was some prospect of recovery by the Company as a creditor of Colour Zone HK, there was a reasonable possibility of some benefit accruing to creditors from a winding-up order in Hong Kong.