Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Shareholder Access To Corporate Records.

30 September, 2013

 

 

The Hong Kong Companies Ordinance, section 152FA provides qualifying shareholders with a statutory right, subject to certain conditions, to inspect the corporate records of a company of which they are a shareholder.

 

Under section 152FA the qualifying shareholder can apply to the court for an order for inspection of corporate records. The application must be made in good faith and for a proper purpose. These requirements must be satisfied before the court can exercise its discretion to grant the order and the court does not have to grant the order even if the relevant requirements are satisfied.

 

Since this provision was introduced into Hong Kong law in 2005 there has been a divergent body of case law regarding the interpretation of the shareholder’s right under section 152FA.

The debate has centred on the interpretation and application of the proper purpose requirement. In some cases the courts have adopted what has been referred to as the ‘liberal’ approach whilst others appear to have adopted a ‘less liberal’ approach.

 

Two cases from 2011 demonstrate the contradictory positions. In Re Lehman Co Management Ltd [2011] 4 HKLRD 237 the judge adopted the ‘less liberal’ approach. It was held that a proper purpose would only be established where the applicant has a specific or personal right which could only be protected by the making of an order for inspection under section 152FA.

 

In contrast, in Wong Kar Gee Mimi v Hung Kin Sang Raymond [2011] 5 HKLRD 241 the judge found that a proper purpose could be established even where no specific or personal right of the applicant existed. Furthermore, where such a right did exist and could only be protected by an order under section 152FA then that would be a persuasive factor in establishing a proper purpose.

 

The question of which of the different approaches is correct was raised before the Court of Appeal in the case of Veron International Ltd [2013] HKEC 835. The Court of Appeal judges refrained from entering into a discussion as to whether there were two approaches and, if so, which should prevail but nevertheless they seem to have favoured a more liberal interpretation.

 

There is still no clear test for determining whether the proper purpose requirement has been satisfied, however, following the Veron case it appears that the courts will be adopting a pragmatic approach in their application of section 152FA and interpretation of the proper purpose requirement. Ultimately, the question of whether there is a proper purpose under section 152FA will depend heavily on the facts of each case.

 

For further information, please contact:

 

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Paul Westover, Partner, Stephenson Harwood
Paul.Westover@shlegal.com

 

Victor Lee, Stephenson Harwood

Victor.Lee@shlegal.com

 

Fiona Cheng, Stephenson Harwood

Fiona.Cheng@shlegal.com

 

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