Our client is a Hong Kong company which has received a large payment further to the sale of its business. The shareholder of our client, a French company, has applied for transfer of the funds to its bank account. Unfortunately, after reviewing the financial and tax situation of our client, its new director had to explain to the shareholder that the previous directors had not prepared any financial statements and that no payment could be made until the financial statements had been prepared and filed with IRD, together with off-shore claim applications for the relevant years.
The new director is a local individual, whereas the previous directors were not Hong Kong residents.
The sale of the business had already taken place a couple of years ago and the new director was not familiar with the previous business of the company; services providers who had been instructed by previous directors were able to show they had fulfilled their duty of information and repeatedly requested documents to prepare the financial statements of the company but their requests were never met.
The documents available to the new director were patchy and he needed strong support to reconstitute the company’s financial statements.
One of our first instructions in relation to this matter was to research the provisions of Hong Kong law related to directors’ duties and liabilities under such exceptional circumstances. Who is responsible for the mess? Are all former and new directors responsible or only the former directors? What should the new director do to comply with his fiduciary and statutory duties towards the company?
We assisted the new director to identify service providers with forensic experience to prepare the financial statements for an audit, as well as off-shore claim applications.
Directly or through our network in various jurisdictions in Europe and Asia, we assisted the new director with various questions which arose, including various assignments of debt and tax consultations.
Once the financial and tax situation of our client was cleared up, the new director was finally confident that the payment requested by the shareholder of the company could be made in a compliant manner, without exposing his liability.
The next step is application for deregistration of the company, which is handled by MLS Company Secretary Ltd.