HONG KONG SAR, CHINA Law and Practice Contributed by: Vincent Lung and Mike Yeung, Parkside Chambers
Derivative Action A shareholder may bring a derivative action on behalf of the company where a wrong is done to the com - pany. This is relevant where directors breach duties, misappropriate assets or divert corporate opportuni - ties, and yet the wrongdoers remain in control of the board so the company is prevented from suing in its own name. The remedy belongs to the company. The shareholder acts as a procedural vehicle to enforce the company’s rights. Just and Equitable Winding Up A shareholder may seek a winding up on the just and equitable ground. This may be appropriate where there is deadlock, loss of substratum, exclusion from a quasi-partnership or a complete breakdown of trust and confidence. The remedy is serious and may destroy value. Courts often consider a winding up to be a remedy of last resort. 4.5 Shareholders in Publicly Traded Companies Disclosure of Interests Substantial shareholders of Hong Kong listed corpo - rations must disclose interests and short positions under the Securities and Futures Ordinance. The gen - eral disclosure threshold is 5% or more of the voting shares. The disclosure regime may capture direct interests, indirect interests, controlled corporations, derivatives, beneficial interests and other deemed interests. Direc - tors and chief executives of listed corporations are also subject to disclosure obligations regarding their
Ordinance and the articles. The key practical require - ment is that members must be able to participate, speak and vote. This is useful for companies with international share - holders. However, companies should ensure that elec - tronic voting, identity verification and meeting records are properly managed. Voting Shareholder decisions are made by ordinary or spe - cial resolution. Ordinary resolutions require a simple majority. Special resolutions require at least 75% approval. Listed companies generally conduct voting by poll and must announce poll results. Proxy voting is also common. 4.4 Shareholder Claims Personal Claims A shareholder may bring a personal claim where a personal right has been infringed. Examples include denial of voting rights, breach of class rights, failure to register a transfer, breach of the articles or misrep - resentation inducing the purchase of shares. A shareholder must distinguish personal loss from a loss suffered or reflected by the company. If the com - pany suffers the loss, the claim usually belongs to the company. Unfair Prejudice Unfair prejudice is one of the most important share - holder remedies in Hong Kong. It is particularly com - mon in private company disputes and quasi-partner - ship companies. Examples may include exclusion from management, diversion of business, misuse of company assets, lack of probity, failure to provide information, excessive remuneration or breach of legitimate expectations. The court has broad remedial powers. A buy-out order is common, but the court may also regulate the com - pany’s affairs or grant other reliefs.
own shareholding. Public Disclosure
Disclosure notices are publicly available. They allow the market to identify significant shareholders and changes in major holdings. Listed companies are also required to set out their substantial shareholders in their annual reports.
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