HONG KONG SAR, CHINA Law and Practice Contributed by: George Lamplough, Vanessa Cheng and Curtis Pak, Holman Fenwick Willan
based on the context and, importantly in fraud cases, to the “fraud exception” . The special rules of attribution will depend on the facts of the case and the language and leg - islative purpose of the relevant statutory provi - sions (Moulin Global Eyecare Trading Limited (in liquidation) v The Commissioner of Inland Rev - enue (2014) 17 HKCFAR 218). In deciding whether the “fraud exception” applies, the Hong Kong Court of Final Appeal in Moulin Global distinguished the following situ - ations: • where a company commences legal action against its directors and officers for wrongdo - ing, which caused loss to the company, the knowledge of the director or officer is not attributable to the company because it would be “absurd and unjust to permit a fraudulent director or employee to be able to use his own serious breach of duty to his corporate employer as a defence” ; and • where a third party takes legal action against the company for the fraudulent conduct of a director or employee, the knowledge of the director or officer is attributable to the company, because the company must take responsibility for such fraudulent conduct, even if the company may be a victim in a way. 3.2 Claims Against Ultimate Beneficial Owners Common Law It is well established that a company is a sepa - rate entity from its beneficial owners. Beneficial owners are often said to exist behind “corpo- rate veil” and are protected from liability for the actions of the company.
However, in certain circumstances, the corpo - rate veil can be pierced so that the actions of a company are treated as the actions of its share - holders. When the company has been used as a vehicle for fraud, it is possible to pierce the corporate veil and bring claims against the ben - eficial owners and directors of the company. The plaintiff has to establish the following in order to pierce the corporate veil: • the company is involved in some impropriety linked to use of the company structure to avoid or conceal liability; and • the wrongdoer controls the company at the time of the relevant transaction. Normally, the court will pierce the corporate veil only when there is clear evidence of fraud. Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (CWUMPO) If, in the course of the winding up of a company: • any person carries on the business of the company with an intent to defraud creditors, or for any fraudulent purpose, the person may be found personally responsible for all or any of the debts or other liabilities of the company (Section 275, CWUMPO); and • any person misapplies or retains any money or property of the company, they may be compelled to repay or restore the money or property (Section 276, CWUMPO). 3.3 Shareholders’ Claims Against Fraudulent Directors General Principles Where directors have breached duties owed to the company, or where any person has infringed any rights of the company, the general rule is that the proper plaintiff is the company itself.
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