Re Yung Kee Holdings case — resolving shareholder disputes

The recent decision of Mr Justice Harris in the case of Re Yung Kee Holdings [2012] 6 HKC 246 in the Court of First Instance in Hong Kong has highlighted some of the issues that can arise in resolving shareholder disputes where offshore companies are used to hold assets and businesses elsewhere. In particular, and subject to what the Hong Kong Court of Appeal may decide, it demonstrates that in many cases where corporate disputes arise, those disputes should be determined in the jurisdictions of incorporation and not in the jurisdictions where the underlying assets or principals are located.

Yung Kee is a famous restaurant in Hong Kong’s Central district (particularly renowned for its goose), founded by Kam Shui Fai, who died in 2004. Prior to his death Kam Senior arranged for the business to be held through two BVI companies, Yung Kee Holdings Ltd and Long Yao Limited. Long Yao was originally the trustee of a unit trust holding interests in the business, but in 2006 this was distributed to members of Kam Senior’s family and they became shareholders in Yung Kee Holdings Ltd, which held Long Yao Limited which, in turn, held the operating companies of the business.

Kam Senior had three sons, two of whom (Kam Kwan Lai and Kam Kwan Sing) were alive at the time of the issue of the proceedings, and a daughter, Kelly Kam. A dispute arose between the two surviving brothers, who had both been involved for many years in the business and had the largest individual shareholdings. In 2010 Kwan Sing commenced the action seeking a winding-up order or alternative relief from the Hong Kong court. By this time, Kwan Lai was in effective control of 55% of the shares of Yung Kee Holdings Ltd…

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