The Hong Kong Court reiterates that a company remains only a nominal party in unfair prejudice petitions fought between its shareholders

Unfair prejudice petitions are a means for minority shareholders to seek redress against a shareholder said to be in control of the company, on the basis that the latter has caused the company’s affairs to be conducted in a manner that is unfairly prejudicial to their interests as minority shareholders. Since such petitions do not involve claims against the company itself, the company is just a nominal party and should not ordinarily participate or expend its funds in a partisan way in those proceedings.

Recently, this position was reiterated in the case of Glory Sky Asia Limited & Ors v Koo Kam Pui & Anor [2023] HKCFI 1849 in which the Court of First Instance stated that the Court’s starting point is a “rebuttable distaste” for a company’s participation in unfair prejudice proceedings and “initial scepticism” as to its necessity or expediency. In considering whether the Company’s participation and expenditure is proper, the test is whether it is “necessary” or “expedient in the interests of the company as a whole“. The onus would be on the company to satisfy the Court with evidence of the necessity or expedience and is no doubt a heavy one. Continue reading