A company’s constitutional documents often include concrete provisions to regulate and control the company’s affairs and functions. There can, however, be situations where strict compliance with the company’s constitution will render it impossible for the company to properly function and simply leave the company paralysed. Fortunately, company law statutes in many common law jurisdictions, such as the United Kingdom, Australia, Hong Kong, the British Virgin Islands and Bermuda, include provisions that allow intervention of the Court when it is no longer possible to carry out certain functions under the company’s own articles or memorandum. One common example is a statutory provision that confers on the Courts a power to convene general meetings in circumstances where it is otherwise “impracticable” for the meeting to be called pursuant to the company’s constitutions.

In the Matter of Fuma International Limited, the plaintiff filed an application for an order under section 570 of the Hong Kong Companies Ordinance, Cap 622 (CO) that a general meeting of the defendant company be convened on the ground that it is impracticable to call the meeting in the manner prescribed by the defendant’s articles. Despite the plaintiff being a majority shareholder holding 62.68% of shares in the company, the plaintiff had not been successful in convening a general meeting because the articles require a quorum of two members holding at least 51% of shares and the other shareholders refused to attend the general meeting leaving it inquorate.

Similarly in Northern Light Group SA v Hansen, an application was made pursuant to section 570 of the CO for an order allowing a general meeting to proceed with a quorum of one member, rather than two members as required by the company’s articles. The plaintiff in that case was one of the two members of the company. Notwithstanding his various attempts to call a general meeting, the plaintiff had not been successful again because of the other member’s refusal to attend the general meeting.

In both cases, the Hong Kong Court noted that for section 570 of the CO to apply, it should first be shown that it would be impracticable to call a meeting of the company; then it is a matter of discretion whether the Court would order a meeting.

The Court in Fuma  further emphasised that “impracticable” does not simply mean impossible. Instead, the Court must examine the individual circumstances of a particular case to answer whether, as a practical matter, the desired meeting can be convened and/or held as appropriate.

As for when the Court should exercise its discretion, the Court helpfully identified certain non-exhaustive circumstances where it will be justified for the Court to do so including, for example, where there is (1) a refusal of another shareholder to form a quorum for the meeting and (2) refusal of an individual to call an extraordinary general meeting in their capacity as a director, rendering it impracticable for the company to convene a meeting.

The BVI Business Companies Act 2004 contains a similarly worded provision as section 570 of the CO which allows the Court to order a meeting of members if certain circumstances, including when it is impracticable to call or conduct a meeting in the manner specified in the BVI Act or the articles or memorandum of the company. A similar provision can also be found in Bermuda’s Companies Act 1981.

While decisions from Hong Kong Courts are not binding in the BVI or Bermuda Courts, as a common law jurisdiction, Hong Kong decisions remain persuasive and are often considered by judges of offshore Courts. The above Hong Kong decisions will therefore serve as a practical guideline and reference point for the interpretation of the equivalent statutory provisions in the BVI and Bermuda.

In all cases, when exercising the discretion to compulsorily require that a meeting be held contrary to the requirements set out in the company’s constitutions, the courts must balance the desire to overcome practical difficulties in carrying out a company’s functions against an unjustified interference of judicial power in internal corporate affairs.