Introduction

After a company is dissolved, it is possible that liquidators might later learn of some overlooked assets or their realisable value. In such circumstances, the liquidators or a person who appears to the court to be interested may make an application to the court for a declaration that the dissolution of the company be void under section 290 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (“C(WUMP)O”).

In the recent case of Stephen Liu Yiu Keung v. Registrar of Companies and another HCMP 2758/2017, upon discovery of the realisable value of an asset of the dissolved company, the former liquidator made such an application.

Background

In March 2000, Hanluck Investments Limited (the “Company”), a company incorporated in Hong Kong, was ordered to be wound up by the court. Since the directors of the Company did not keep proper books/records, the liquidators experienced great difficulties in investigating into the affairs of the Company and recovery of its assets and could only realise/recover a small amount of money. Consequently, no distribution was made to the Company’s creditors and the Company was dissolved under section 227 of C(WUMP)O in May 2004.

On 22 December 2017, one of the former joint and several liquidators (the “Applicant”) issued an originating summons against the Registrar of Companies and the other former joint and several liquidator, amongst others, for an extension of time to make an application under section 290 of C(WUMP)O and an order that the dissolution of the Company be declared to have been void.

According to the affirmation of the Applicant, he was informed by a former shareholder and director of the Company and his PRC lawyer that the Company “had an interest” or “had certain rights” over a piece of land (the “Land”) in the PRC with an estimated value of RMB120,000,000, which previously had not been brought to the attention of the liquidators or the Official Receiver. Later in 2017, a potential buyer, who the Applicant believed was not connected or associated with the Company’s shareholders and/or former directors, expressed interest in purchasing “whatever rights the Company may have over the Land”.

As the Company still owed more than HK$77,000,000 to its creditors, despite the uncertainties over the Company’s rights on the Land and its estimated value, the Applicant considered that the realisation of the alleged rights over the Land could repay substantial part of the Company's outstanding debts or benefit the creditors by providing financing for investigation into the Company’s affairs for recovery of other assets which could not be done previously for want of funding.

Section 290 of C(WUMP)O

Section 290 of C(WUMP)O provides that:

“(1) Subject to subsection (1A), in the case of a company which has been dissolved under section 226A, 227, 239 or 248, the court may at any time within 2 years of the date of the dissolution, on an application being made for the purpose by the liquidator of the company or by any other person who appears to the court to be interested, make an order, upon such terms as the court thinks fit, declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

 (1A) The liquidator of the company or any other person who appears to the court to be interested may at any time apply to extend the period of 2 years referred to in subsection (1) and the court may so extend, on such terms and conditions as seem to it just and expedient, if it is satisfied that there are exceptional circumstances justifying the extension.”

As such, the applicant making an application for a declaration that the dissolution of a company was void must show that:

1.       the dissolution was under one of the provisions mentioned in section 290(1) of C(WUMP)O;

2.       the application was made within 2 years of the date of the dissolution or any period extended by the court; and

3.       the applicant is a liquidator or a person who appears to be interested.

The Court’s decision

The primary purpose of section 290 of C(WUMP)O was to enable liquidators to distribute overlooked assets or a creditor to make claim which he has not previously made, the Court considered that it also applies to similar situations where liquidators were aware of an asset but unaware that the asset has any realisable value.

The Court granted the extension of time to the Applicant and ordered the dissolution of the Company be declared to have been void for the following reasons:

1.       It appeared that the Company still owed outstanding indebtedness to its creditors;

2.       The Applicant only learnt of the Land in 2016 and had previously experienced great difficulty in investigating into the affairs of the Company;

3.       While there was uncertainties as to the Company’s interest/rights in the Land, the Court accepted that the Applicant had placed sufficient materials before the Court to demonstrate prima facie evidence that the Company might have an interest in the Land;

4.       While the Applicant had reservation about the estimated value of the Land, the fact that the potential buyer indicated interest in purchasing the Land showed that the Land had some marketable value. As such, the Court agreed that the Land might yield at least some funds for the liquidators to investigate or recover other properties or assets of the Company for the benefit of the creditors.

Who can make the application under section 290 of C(WUMP)O?

Pursuant to section 290 of C(WUMP)O, such application can be made by the liquidator of the company or by any other person who appears to the court to be interested. In the case of Stephen Liu Yiu Keung v. Registrar of Companies and another (HCMP 2758/2017), the Applicant did not wish to be reappointed as a liquidator of the Company if the Company was revived, therefore, the question of whether he had sufficient interest to make the application arose.

While the Court considered that former liquidators had locus to make such application, in order to ensure all orders granted would be effectively carried into effect and bind all relevant parties, the Court normally expects the applicant to be a liquidator seeking re-appointment after revival of the company, and if not, the person seeking appointment as liquidator upon revival of the company and/or the person who appeared to be interested shall join as applicants.

Conclusion

Section 290 of C(WUMP)O enables liquidators to revive a dissolved company if they later learnt of some overlooked assets or the realisable value of some assets of the dissolved company. To ensure unnecessary delay to the application, if the former liquidator was not seeking re-appointment after revival of the company, it is recommended that the person seeking appointment as liquidator upon revival of the company and/or the person who appeared to be interested shall be joined as applicants.

  

For enquiries, please contact our Litigation & Dispute Resolution Department:

E: insolvency@onc.hk                                   T: (852) 2810 1212 W: www.onc.hk                                             F: (852) 2804 6311 19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2018