Dear all
I am
Natalia Cheung, an Accredited Mediator of the Hong Kong International
Arbitration Centre and a practising solicitor in Hong Kong.
I would like to share with you some information
on the use mediation for company winding up cases under the laws of Hong Kong.
Mediation in Company Winding Up Cases
Pursuant
to Practice Direction 3.3 of the Rules of the Hong Kong High Court (Cap. 4A)
(PD 3.3), parties of winding up petitions presented under sections 168A and 177(1)(f)
of the Companies Ordinance (Cap. 32) are encouraged by the Court to consider
using mediation to resolve their disputes.
Petition under section 168A:
Petition to the Court to wind up a company on the ground that the company’s affairs are being or
have been conducted in a manner unfairly prejudicial to the interests of the
members generally or of some part of the members (including himself).
Petition under section 177(1)(f):
Petition to the Court to wind up a company on just and equitable ground.
PD
3.3 applies to the above winding up petitions:
(i) where there is no allegation of
insolvency concerning the subject company and no allegation that the affairs of
the company would require full investigation in the public interest.
(ii)
where the petitions
are purely disputes between shareholders, not involving the interest of the
general body of creditors of the subject company or affecting the public
interest.
Initiation of Mediation
At any stage of the petition, a
party (“the Applicant”) wishes to attempt mediation
should serve a Mediation Notice on the other
party or parties (“the Respondent”) to invite them to agree to mediation.
The Respondent should give
a written Mediation Response to the Applicant within 14 days upon receipt of the Mediation Notice, or within such further time
as the parties may agree.
The agreement on
mediation should be
reduced into a written minute signed by the parties and the
proposed mediation should proceed accordingly.
Voluntary Nature of Mediation
Parties reach an agreement to
mediate on a voluntary basis. Such an agreement is not actionable as a
contract, and is without prejudice to the parties’ contentions in the petition.
A party to an agreement to
mediate is free to withdraw from mediation at any time and to proceed with the
petition.
Costs Sanction
Where a Mediation Notice has
been served, a party who has unreasonably refused or failed to attempt mediation may be
subject to adverse costs
order imposed by the Court.
Generally, no adverse costs order
will be imposed on a party where:
(i) he has engaged in mediation up
to the minimum level of expected participation agreed by the parties beforehand
or as determined by the Court; or
(ii)
he has a reasonable
explanation for non-participation.
In determining whether a party
has acted unreasonably in refusing or failing to proceed with mediation, the Court will not usually consider
or inquire into:
(i) what happened during the mediation
process;
(ii)
why the process
failed; or
(iii)
whether any failure
in the process may be ascribed to unreasonable conduct by any party.
Stay of the petition
The
parties may apply to
a Companies Judge to stay the petition, pending the progress of mediation.
If the parties cannot
resolve their disputes through mediation within the stay period, they shall apply to restore the petition within 7 days of the expiry of the stay.
Report on mediation
effectiveness
Parties or their legal representatives are
requested to report to the Court on the effectiveness of
mediation in resolving the subject winding up disputes within 28 days of the conclusion of the court
proceedings.
For further information on mediation, please contact Ms. Natalia Cheung
[(852)-6777 5767]
E-mail: natalia@plaw.hk
Natalia Cheung
HKIAC Accredited Mediator & Hong Kong Solicitor
Pang Kung & Co., HK Solicitors & Notaries & Civil Celebrants of Marriages
Disclaimer: The above is
for your information and reference only. The contents do not constitute legal
advice or a substitute for legal advice in individual cases.
