Beauty China Holdings Limited (the "Company") was
incorporated in the Cayman Islands and its shares were listed on
the main board of the Singapore Exchange Securities Trading
Limited. It was not registered under Part XI of the Companies
Ordinance (Chapter 32 of the Laws of Hong Kong) (the
"Companies Ordinance") and was an unregistered company
within the meaning of section 326 of the Companies 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) Limited ("ICBC
Asia"). ICBC Asia was the successor agent of a term loan
facility in the sum of HK$135 million (the "Loan
The Company opposed the petition on the ground that the Hong
Kong court should decline to exercise its winding-up jurisdiction
against a foreign company.
The court following the principles laid down in earlier cases
including Re Zhu Kuan Group Co Ltd  HKCU 1047
affirmed that it had jurisdiction to wind up an unregistered
company under section 327(1) of the Companies Ordinance.
The core requirements for exercising this jurisdiction are as
(a) 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;
(b) there must be a reasonable possibility that the winding-up
order would benefit those applying for it; and
(c) 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 (c) was satisfied. The
court was able to exercise jurisdiction over some of the
petitioners and the supporting creditor.
As regards requirement (a), the Company was an investment
holding company and 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 Loan Agreement was
prepared, negotiated and approved in Hong Kong. The principal sum
of the Loan Agreement was remitted to the Company's bank
account in Hong Kong. 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 Hong Kong courts and submitted to the
non-exclusive jurisdiction of the Hong Kong courts. The Company had
two wholly-owned subsidiaries in Hong Kong. On the evidence, the
Company had sufficient connection with Hong Kong to justify the
Hong Kong court setting in motion its winding-up procedures. The
requirement (a) was satisfied.
As regards requirement (b), one of the Company's wholly
owned subsidiaries in Hong Kong ("HK Subsidiary") had a
wholly owned subsidiary in the PRC with a paid-up capital of HK$20
million. The HK Subsidiary also had among its current assets,
amounts due from fellow subsidiaries of HK$6.3 million odd and had
cash and cash equivalents of HK$1.6 million odd. The Company was
not virtually worthless. The fact that the liabilities of the HK
Subsidiary exceeded its assets did not mean there was no prospect
of some recovery for creditors of the HK Subsidiary.
The significant subsidiary of the Company was a company in
Zhuhai engaged in the manufacturing of cosmetic skin care products
with a registered capital of HK$70 million. In view of the
proximity of Hong Kong to Zhuhai and that there was some prospect
of recovery by the Company as a creditor of HK Subsidiary, there
was a reasonable possibility of some benefit accruing to creditors
from a winding-up order in Hong Kong. Requirement (b) was therefore
The court held that it was appropriate in all the circumstances
to exercise jurisdiction to wind up the Company. Accordingly, the
court made a winding-up order.
Based on the decision of this case, it is clear that the Hong
Kong court has jurisdiction to wind up an unregistered foreign
company as long as the three core requirements for exercising this
jurisdiction are satisfied.
Experienced lawyers in our Corporate Finance and Securities
Department regularly advise listed companies on regulatory
compliance and company law issues. If you have any question
on the above eNews, please do not hesitate to contact us.
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The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
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