The Hong Kong Court of First Instance confirmed in its recent
decision in Wong Ming Bun v Wang Ming Fan [2014] 1 HKLRD
1108 that in any claim by way of derivative action on behalf of a
company incorporated in the British Virgin Islands it is mandatory
to first seek the approval of the British Virgin Islands court
under section 184C of the BVI Business Companies Act 2004 before
bringing such an action, regardless of whether the contemplated
action is to be brought before the British Virgin Islands courts or
overseas.
In Wong v Wang the claimants purported to bring a
derivative claim in Hong Kong, and the respondents to the action
sought to have the claim struck out on the basis of the failure to
comply with British Virgin Islands law. The claimant tried to argue
that the requirement to obtain the permission of the British Virgin
Islands court was merely procedural, and that under normal conflict
of laws principles matters of procedure were to be determined by
the law of the forum (ie. Hong Kong law), and therefore the
claimants should be free to bring their action under the common law
rules.
Mr Justice Peter Ng decisive rejected the claimant's argument.
Following existing case law in both England (Konamaneni v Rolls
Royce Industrial Power (India) Ltd [2002] 1 WLR 1269) and Hong
Kong (East Asia Satellite Television (Holdings) Ltd v New Cotai
LLC [2011] 3 HKLRD 734) he held that the right to bring a
derivative action is a substantive matter of law to be determined
according to the law of the place of the company's
incorporation – not merely a matter of procedure for the law
of the forum. Although the requirement for leave to bring
such an action appeared procedural, the matter must be considered
in an "international context." When viewed in this manner
it is a right which is intrinsically connected to the company
shares.
From the judgment it is apparent that the claimants did not seek
advice on British Virgin Islands law in relation to the action, and
this ultimately led to their claim being struck out and costs being
assessed against them. The case therefore serves as a timely
reminder of the importance of seeking proper British Virgin Islands
legal advice when confronting claims relating to British Virgin
Islands companies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
