Remedy of the Statutory Injunction in Hong Kong Company Formation


Div.3 Pt.14 of Cap. 622 and Section 350B of Cap.32 generally enlist the provisions related to the matters of statutory injunction after register company in Hong Kong online or offline. These provisions were first introduced as the result of the recommendations of the Standing Committee on the law reforms in 2001 and subsequent to the findings of this committee, legislation was amended on the grounds of the recommendation that court should be given general powers to grant an injunction if application pertaining to contravention of the provisions of the ordinance or breach of fiduciary duties, is submitted by any person before the court.

As per the Section 728-729 of Cap. 622 certain people such as members of the company were allowed to apply to the court for the order of injunction on account of breach of provisions of Cap. 622, breach of fiduciary duties by the directors and breach of company’s constitution. The only difference that exists between such orders in Cap. 622 and Cap. 32 is that; Cap. 32 deals with the contravention of Cap. 32 while the provisions of Cap. 622 orders for the injunction in case of breach of Cap.622 while similarity is that both are for register company in Hong Kong online or offline.

Now the next question could be about the application of such provisions that; are they applicable on Hong Kong companies or Non-Hong Kong Companies (offshore company registration in Hong Kong) or both? The answer is as simple and basic as the question is: These provisions are equally applicable to both Hong Kong and Non- Hong Kong companies or any offshore company registration in Hong Kong.

Eligible Person(s)

Eligibility is the basic and foremost criteria in ascertaining the seriousness and credibility of any petition because it must be ensured that whether the person who is bring up proceedings against one party; does holds the basic eligibility to bring up proceedings or this petition is just to abuse the respondent and filed before court to waste time of the court and make respondent liable to unnecessary legal obligations? So, as per the script of Section 729(1) of Cap. 622 members and creditors of the company irrespective of the fact that whether open company in Hong Kong online or offline, are eligible to apply to court for the order of injunction, provided interests of the member or creditor have been or would have been infringed if the conduct against which injunction is sought, would occur. As per the literature of Section 729(2) of Cap. 622 Financial Secretary of the company also has the entitlement and power to seek an injunction.

Scope of Court’s Power and Order

If we talk about the scope of court’s order and power, let’s start with what orders, court generally can grant. As per the script of Section 729 of Cap.622, court can exercise its power to restrain certain people for carrying out impugned conduct or force person to do anything court thinks fixes the appropriacy of the circumstances and so does necessary to order injunction such as power to direct person in question to act positively. In addition to this, other powers of court include:

  • Give order to the abuser or wrong doer to pay damages to the victim of impugned conduct.
  • Court can give order to declare any contract void, to the extent specified in court’s order and to what court thinks to satisfy essence of justice.

If we talk about Australia, legislation of Australia held injunction to be at court’s discretion and thus it is upon the discretion of court to order, what it deems appropriate. Australian authorities are found to be quite generous in this regard and thus give widest possible powers to the court under statutory provisions and delimits courts to restrain traditional exercise of those jurisdictions which negates the grant of injunction relief to the victims on the basis of equity, since these powers must be exercised in the true sense of judicial norms/ values and sensibility. Australian legal commentators say that; since in Australia, court’s power to issue orders of the injunction basically falls within the jurisdiction of statutory provisions and not from traditional court’s equitable jurisdiction then on the basis of these facts, court is entitled to take into consideration wider factors such as the essence and purpose of company’s legislation in light of court’s exercise of its discretion.

While talking about the scope and abruptness of court’s powers and orders; court has the power to grant either interim orders or final order consisting of injunction order, irrespective of the grounds that whether open company in Hong Kong online or offline. Issue of final order is sure shot and the question which drives court to grant order of injunction shall already been answered in the proceedings of this petition. But to determine the criteria and to assess the situation that whether interim order should be granted or not? Court shall look into the probability of serious question to be tried or will the balance of convenience favours grant of such orders? However general perception says that such traditional equitable principles does not generally circumscribe the statutory jurisdiction of the court.

Let’s now refer to some legal cases so that clear idea can be perceived. The case of Tysan Holding Ltd refers to the situation where court passed the interim injunction order to restrain directors of the company to act or involve in any conduct to fulfil the obligations of agreement regarding sales of company’s shareholding in another company, especially in the situation where any authorisation of transactions on the part of director shall result in the breach of their fiduciary duties owed to the company. For the same case, applicant has also applied to the court to grant leave of court to commence the proceedings of Statutory Derivative Action. Court in the proceedings of this case, affirmed that it has the jurisdiction and powers so as to pass the interim orders in terms of injunction order in order to respect the commencement of separate proceedings of member and conclusion of trial pertaining to derivative action.

If we go on analysing the script of Section 728-729 of Cap. 622 we shall end up in concluding that Section 728-729 of Cap. 622 basically provides the statutory exceptions to the principles entailed in the case of Foss. Section 728-729 of Cap. 622 gives member a power to inject statutory injunction against any conduct which seems to be coming in the breach of fiduciary duties owed to the company, by directors of the company. Despite of the fact that Section 729 of Cap. 622 gives court power to bound wrong doer for the payment of damages to the victim but still it seems as Section 728-729 of Cap. 622 does not deem to override the principles explained in the case of Foss instead it deems to authorise personal powers to the members so as to seek compensation in case of wrong conduct, for the company. Moreover, court’s powers regarding award of injunction is of discretionary nature and thus court is entitled to take into consideration all the possible circumstances even such consideration is in line with the principles of Foss, to ensure that justice be served and to assess the legitimacy of grant of injunction as per Section 729 of Cap. 622.

We shall now discuss the scope of damages that is should it better be called an alternative remedy or a supplementary remedy, in lieu of injunction. If we talk of Australian version, we shall end up in concluding that; court has the entitlement to award damages under provisions of Corporation Act 2001 such as its Section 1324(10) as either a substitute remedy or a supplementary remedy, for the cases of injunction (if to be precise). Thus, in lieu of this understanding legal commentators say that; Australian authorities keeps this established that where injunction is not sought there shall not even be award of damages. This restriction has further been extended to the situation where court thinks that there shall be no prospect of damages, if injunction shall be ordered. One must not think that such declaration has been made by the Hon’ble court in quite vague manner. Instead this view costs Australian authorities, an extensive study of the context and structure of Statutory provisions as well as thorough study of provisions and scrip of Section 1324 (10) of Corporations Act 2001 pertaining to award of damages, whether as substitution or in addition to the sought injunction. Court’s remarks in the description of this view is of immense importance, it has been said that:

If general powers regarding award of damages shall has to be created in the statue then one may expect to see its disengagement from the section that purely deals with the matters related to injunction.

Now let’s come to the Hong Kong’s version in this regard, if we look into the Section 350B (7) of Cap.622 then one may reach to the conclusion that Hong Kong’s legal ambience also considers award of damages as a substitution or as in addition to the grant of injunction. Legal commentators communicate that; same reasons shall be held applicable in Hong Kong’s situation as that of the reasons for the Australian version.

But if we move towards Section 729(1)(b) of Cap. 622 it seems as if it does not impose same limitations as we found in the wording of Section 350B because Section 729(1)(b) of Cap. 622 says that; Court has the entitlement to order any person to pay damages to any person. But there is one thing that needs to be noticed and acknowledged, generally Section 728-730 of Cap. 622 is based on the Section 350B of Cap. 32 and when Cap.622 was enacted it seemingly did not deem to alter the scope of available legislative remedies, in relation to award of remedy. Thus, in light of this legislative journey of Section 728-730 of Cap. 622 and the reluctance of the court to attribute a radical change in legal elaboration of this provision clearly sends the message that Section 728-730 of Cap. 622 shall be read properly with the Section 350B (7) of Cap. 32.