Convoy shareholder granted leave to appeal

A legal battle over financial services firm Convoy Global will go to the city’s top court after the Court of Appeal ruled that the case raised important questions regarding the corporate governance of companies across different jurisdictions.

Convoy, which was delisted by the Hong Kong Stock Exchange in May after a multi-year suspension, is based in the SAR but registered in the Cayman Islands.

The case involves a challenge by shareholder Kwok Hiu-kwan against a decision by incoming chairman Johnny Chen not to allow him to vote at an extraordinary general meeting in December 2017.

Kwok’s lawyers had argued that the chairman’s decision should be challengeable in court if it was manifestly wrong or unreasonable.

The Court of First Instance had previously dismissed Kwok’s case, ruling that the chairman’s decision shall be read as final and conclusive under the company’s articles of association, and could only be overturned if it was made in bad faith. The Court of Appeal later also affirmed the ruling and rejected Kwok’s appeal.

But in a separate judgement handed down on Friday, three court of appeal judges agreed that it would be appropriate to allow the applicant to take his case to the top court.

They said while that they had followed the English courts’ approach by ruling that the chairman’s decision could only be set aside if it was made in bad faith, a different approach has been adopted by Australian and New Zealand authorities.

The court also noted that more than 1,400 listed companies in Hong Kong which are registered in the Cayman Islands have clauses in their articles of association identical or similar to those used by Convoy.

The judges said given the prevalence of the clauses, they believe the legal question raised in the appeal would have a “wide impact on corporate governance” of Cayman companies, and companies in other common law jurisdictions.

In early December 2017, the ICAC and the Securities and Futures Commission arrested three senior executives at Convoy on suspicion of corruption. The trio were acquitted last year.