BVI advice necessary in relation to BVI company claims: Wong v Wang

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The Hong Kong Court of First Instance confirmed in its recent decision in Wong Ming Bun v Wang Ming Fan [2014] 1 HKLRD 1108 that in any claim by way of derivative action on behalf of a company incorporated in the British Virgin Islands it is mandatory to first seek the approval of the British Virgin Islands court under section 184C of the BVI Business Companies Act 2004 before bringing such an action, regardless of whether the contemplated action is to be brought before the British Virgin Islands courts or overseas.

In Wong v Wang the claimants purported to bring a derivative claim in Hong Kong, and the respondents to the action sought to have the claim struck out on the basis of the failure to comply with British Virgin Islands law. The claimant tried to argue that the requirement to obtain the permission of the British Virgin Islands court was merely procedural, and that under normal conflict of laws principles matters of procedure were to be determined by the law of the forum (ie. Hong Kong law), and therefore the claimants should be free to bring their action under the common law rules.

Mr Justice Peter Ng decisive rejected the claimant’s argument. Following existing case law in both England (Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 WLR 1269) and Hong Kong (East Asia Satellite Television (Holdings) Ltd v New Cotai LLC [2011] 3 HKLRD 734) he held that the right to bring a derivative action is a substantive matter of law to be determined according to the law of the place of the company’s incorporation – not merely a matter of procedure for the law of the forum.  Although the requirement for leave to bring such an action appeared procedural, the matter must be considered in an “international context.” When viewed in this manner it is a right which is intrinsically connected to the company shares.

From the judgment it is apparent that the claimants did not seek advice on British Virgin Islands law in relation to the action, and this ultimately led to their claim being struck out and costs being assessed against them. The case therefore serves as a timely reminder of the importance of seeking proper British Virgin Islands legal advice when confronting claims relating to British Virgin Islands companies.

Topics:  Derivatives, Foreign Judgments, Foreign Jurisdictions

Published In: Civil Procedure Updates, General Business Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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