Conyers is pleased to announce that following a highly contested and vigorously opposed two-day hearing on 25 and 26 June 2025, the BVI High Court granted a significant victory to Mr Ma, Kwok Leung, to commence derivative proceedings on behalf of Xeno Origin Limited, a BVI company currently under joint receivership.
Brief Background
The proceedings, heard before Honourable Justice Gerhard Wallbank on 25 and 26 June 2025, centred on Mr Ma's application for leave to bring derivative claims in Hong Kong on behalf of Xeno Origin Limited. The case involved intricate issues of standing, the merits of the underlying claims, and the statutory requirements under section 184C of the BVI Business Companies Act.
Court's Ruling and Key Findings
Justice Wallbank's ruling, delivered at the close of the two-day hearing, was emphatic in its recognition of the merits of the application and the quality of the submissions advanced by the counsel team of Mr Ma. Specifically, the Judge made several notable comments:
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On Standing:
The Court noted that, "It suffices for Mr Ma to be a member and indeed to be a member who retains some kind of rights and benefits of being a member because that's ultimately what derivative proceedings are there to vindicate or enhance." This finding directly addressed and dismissed the technical standing objections raised by the joint receivers. -
On the Merits and Likelihood of Success:
In relation to the merits of the application, the Court specifically highlighted several important findings, including:- Whether or not "offers" are admissible or inadmissible is a question of relevance. It depends on what the offer concerned. Here, it was about buying into the project before the Court, and while it would be a matter for the trial court to decide upon admissibility, the Court would be inclined to think the offers are relevant and indicative of market value because they offer the assets the receivers went on to sell.
- There is additional evidence of value, including sequestration, a court auction, and the bundling of value with the 51% interest. This demonstrates that there is clear evidence of value.
- The Court observed it was comparing various offers all upwards of hundred millions of dollars for the shares in the company, and the amount of US$1 million that it was sold for. The difference is vast and stark. The offers made appear prima facie genuine, made by serious financial institutions with no evidence that they were fabricated or gerrymandered for the purposes of boosting Mr Ma's claim. Therefore, the Court could not dismiss the offers as irrelevant, and did not need a valuation from Mr Ma in the formal sense at this preliminary stage of the proceedings.
- One of the receivers sought to justify selling the shares for
US$1 million. What stood out, however, was that the justification
appeared in a document prepared by MBK, the lender, rather than by
the receivers themselves. This document essentially put words in
the receivers' mouths, explaining why the sale price could be
considered reasonable. Such a justification should have come
directly from the receivers.
The receivers in question were highly experienced and capable of formulating their own rationale. They should not need someone else to provide it. Their role requires independent judgment, especially in matters like this, rather than simply agreeing with external related and interested parties' opinions.
Additionally, the sale process revealed a concerning lack of engagement from the receivers. It seemed that MBK was taking the lead on their behalf, rather than the receivers actively managing the process themselves. - While the receivers may have simply been overly trusting, there remains a possibility that they acted negligently and could be held liable. It appeared that the receivers, the lender (MBK), and the 51% majority shareholder (Cinda) were working in concert. The receivers seemed to be involved in negotiations that had reportedly been ongoing between MBK and Cinda since 2021. Rather than acting independently, the receivers appeared to be inserted into an existing arrangement, like a missing piece in a puzzle, suggesting they were following a pre-established plan rather than exercising independent judgment.
- When a real third-party potential investor approached with an offer, the receivers put down a 10% non-refundable deposit requirement which had to be satisfied within a few days, providing insufficient time for the investor to do their due diligence, and essentially setting up the respective offers to fail. The investors, finding this condition unreasonable, apparently did not proceed. As such, the Court criticised the receivers for imposing this 10% non-refundable deposit and requiring a term sheet to be signed within mere days.
- Mr Ma's application shows a very strong case that the receivers did not do their jobs properly, either in discharging their duties or fulfilling the requirements of law. Therefore, the receivers should be tested on what they have done, and should be required to explain how they carried out their actions.
If the receivers were not involved in a coordinated effort with MBK and Cinda to acquire the company, they should have at least taken steps to explore alternative offers. Specifically, they ought to have reached out to other potential investors to determine whether higher bids could be secured. Their failure to do so is either astonishing, if they were genuinely acting independently and fulfilling their duties, or entirely plausible if they were part of a broader scheme aimed at steering the deal toward MBK and Cinda.
In either case, the receivers must be required to fully explain their actions and the rationale behind their decisions. If they were not collaborating with MBK and Cinda, they should have demonstrated due diligence by actively seeking better offers.
The Court concluded that this is a very strong case, and there is a good likelihood of success. Finally, the Court held that, "It is very simple. It is whether it is more probable than not that the proceedings will succeed. It does not require that the Applicant demonstrate that success is an absolute certainty or that the probability of success is very strong. So it's just more probable than not. And what the Court has to do is a proper evaluation of the evidence, but without descending into a mini trial on the merits of the claim."
In the circumstances, the Court accepted Mr Ma's submissions on the applicable legal test and the sufficiency of the evidence presented.
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On Good Faith and Purpose:
The Court also held that it was a perfectly sensible and indeed good faith reason for wanting to bring a derivative action. This comment underlines the Court's acceptance of the client's bona fides and the strategic rationale for the application. -
On Costs and Commercial Benefit:
The Court was persuaded by Mr Ma on the cost-benefit analysis and his commitment to indemnify the company. The Court further agreed that the derivative claim was necessary and not duplicative of other available remedies.
Mr Ma was successfully represented by inter alia the Conyers Singapore Litigation and Restructuring Team, headed by Director Anna Lin, who is assisted by Associates Adly Rizal and Ye Yang Wang in Singapore, and the highly regarded Conyers BVI team.
How Conyers Can Assist
This outcome underscores the Conyers Litigation and Dispute Resolution team's market-leading capability in:
- Navigating the intersection of BVI and Asian legal systems
- Managing high-stakes, multi-jurisdictional shareholder and insolvency disputes
- Delivering practical, results-oriented solutions for clients facing urgent and complex challenges
If you are considering or facing derivative or shareholder litigation involving BVI or offshore entities, Conyers is ready to provide the strategic advice and robust representation needed to secure your commercial objectives.
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.
