Mediation In Company Winding Up Cases

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.