Pursuant to section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32), upon the making of a winding up order by the Hong Kong court, any transfer of shares of a company made after the presentation of the winding up petition would be void unless the Court otherwise orders. The company’s application sought an order that notwithstanding the presentation of the Petition, all transfers of issued and fully paid-up shares of the company since the date of the presentation of the Petition shall not be void, ie a validation order.

The Court held that a transfer of fully paid-up shares would generally be unobjectionable since the object of section 182 was to prevent a shareholder from evading liability to contribute by transferring their shares to an impecunious party, which can have no application to shares that are fully paid-up. The Court further held that it would be appropriate to grant a validation order where the evidence shows that all the issued shares of the company are fully paid-up such that transfers of these shares would not prejudice the creditors of the company in the event of a winding up order.

While a decision of the Hong Kong Court of First Instance is not binding on offshore jurisdictions such as the BVI and the Cayman Islands, given the existence of a similar statutory provisions , namely section 175 of the BVI Insolvency Act 2003 and section 99 of the Cayman Companies Act (2023 Revision), it will be interesting to see whether the BVI and Cayman courts will adopt similar reasoning in a similar context.