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Shareholder Fallout - How to Close Company Without Consent?

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  1. #1

    Join Date
    Jun 2021
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    Question Shareholder Fallout - How to Close Company Without Consent?

    Hi all,
    I would like to close a solvent HK Limited company without meaningful revenue. The business model struggles to meet its funding goals and continue its operations. I am the sole director and 85% shareholder.


    The issue is: There was a fallout with the 15% shareholder he doesn’t support any of my decisions and tries to block every action I do because he is bitter. I was considering to de-register but apparently that requires consent of all shareholders. My accountant unfortunately is not knowledgable and unable to provide basic guidance (sad, I know)
    I would like to avoid making a mistake and getting problems with the CR, etc.


    Do you have experience on how to best close companies (Deregister, make dormant then strike off, windup, other options) and what steps to undertake to be perfectly compliant with rules and regulations?

    Any contacts who can help with the process would be appreciated also.

    Cheers,
    Detlef

  2. #2

    Could you either buy our the 15% shareholder or sell your 85% interest to the minority shareholder? Might be quicker and easier than pushing through a voluntary winding up.

    I'm assuming from your post that there is no shareholders agreement with dispute resolution provisions in it?

    Some information on voluntary winding up process is here:

    https://www.guidemehongkong.com/busi...ny-liquidation


  3. #3

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    Jun 2021
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    Quote Originally Posted by traineeinvestor:
    Could you either buy our the 15% shareholder or sell your 85% interest to the minority shareholder? Might be quicker and easier than pushing through a voluntary winding up.
    He will not agree to it either way...

    Quote Originally Posted by traineeinvestor:
    I'm assuming from your post that there is no shareholders agreement with dispute resolution provisions in it?
    SA states that disputes shall be settled through HKIAC under the UNCITRAL Arbitration Rules but I think the company is too small to justify the high fees.

  4. #4

    Any chance to increase your shareholding to 90% i.e. dilute the other shareholder by means of a one sided equity injection and then try to squeeze him out in the regulated squeeze out process?


  5. #5

    Join Date
    Jun 2021
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    Quote Originally Posted by riversidejr:
    Any chance to increase your shareholding to 90% i.e. dilute the other shareholder by means of a one sided equity injection and then try to squeeze him out in the regulated squeeze out process?
    yes in fact I own 91%. got resources for this?

  6. #6

    Join Date
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    75% shareholding is sufficient to pass a Special Resolution to voluntarily wind up your company. There's no need to dilute the other shareholder further.

    Be sure to follow proper procedure when calling the general meeting and best to hire a professional to help with the voluntary winding-up.

    Sources:

    Cap 622 Companies Ordinance Sec 564 Special Resolution:

    (1) A special resolution of the members (or of a class of members) of a company means a resolution that is passed by a majority of at least 75%.

    https://clic.org.hk/en/topics/bankru...company_itself

    shri likes this.

  7. #7

    I think it is best to ask a lawyer (you will however need to consider cost/benefits) as I am only aware of the squeeze out rules but not know any details


  8. #8

    Join Date
    Dec 2013
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    I looked into this type of issue a couple of years ago when I was in a minority position. Only shareholders with more than 25 percent have any ability to stop things in HK, and even those are limited. I think you are probably fine to go ahead.


  9. #9

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    Quote Originally Posted by GRRR:
    75% shareholding is sufficient to pass a Special Resolution to voluntarily wind up your company. There's no need to dilute the other shareholder further.
    Agree, at 75% shareholding there is a lot you can get done, but should be done with a little bit of professional help / precision.

  10. #10

    Go speak to someone face to face at companies registry and ask them since this is what they do all the time and will ensure that you get the wording right and not miss any forms.

    Below is the phone number of the main people. Ask them to point you in the right direction.

    https://tel.directory.gov.hk/index_CR_ENG.html


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