Re HL Sensecurity Pte Ltd (formerly known as HL Integral Systems Pte Ltd)

JudgeChoo Han Teck J
Judgment Date31 July 2006
Neutral Citation[2006] SGHC 135
Citation[2006] SGHC 135
CourtHigh Court (Singapore)
Published date31 July 2006
Plaintiff CounselLeslie Yeo Choon Hsien (Leslie Yeo & Associates)
Defendant CounselMichael Moey Chon Woon (Moey & Yuen)
Subject MatterCompanies,Winding up,Whether company unable to pay its debts,Whether directors acting in the affairs of the company in their own interests rather than in the interests of the members as a whole,Whether just and equitable to wind up company,Sections 254(1)(e), 254(1)(f), 254(1)(i) Companies Act (Cap 50, 1994 Rev Ed)

31 July 2006

Choo Han Teck J:

1 This is a petition presented by Sensecurity Investments Pte Ltd for the winding-up of HL Sensecurity Pte Ltd (“the company”). The petition is premised upon the grounds stipulated in ss 254(1)(e), 254(1)(f) and 254(1)(i) of the Companies Act (Cap 50, 1994 Rev Ed), namely, that:

(a) The company is unable to pay its debt.

(b) The directors have acted in the affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatever which appears to be unfair or unjust to the other members.

(c) It is just and equitable for the company to be wound up.

2 Having considered the arguments of the parties and the circumstances of the case, I was of the view that the company should be wound up based on ss 254(1)(e), 254(1)(f) and 254(1)(i) of the Companies Act, as the company was unable to pay its debts, because Charlie Ho had acted in a manner that was in his own interests rather than in the interests of the members as a whole and because it was just and equitable to do so.

Background facts

3 The company was formerly known as HL Integral Systems Pte Ltd and had two shareholders, Charlie Ho and Henry Ho. On 30 December 2002, the company entered into an agreement (“the agreement”) with the petitioner for the sale and purchase of Sensecurity Pte Ltd (“Sensecurity”), which was a subsidiary of the petitioner, in consideration for the issuance of shares in the company to nominees of Sensecurity. Sensecurity’s nominees were the petitioner, Infocomm Investment Pte Ltd (“Infocomm”) and one Tan Lyn-Li. Under the agreement, the petitioner, Infocomm and Tan Lyn-Li were to hold 50% of the company’s shares. Charlie and Henry Ho would hold the other 50% of the company’s shares. The company was renamed as HL Sensecurity Pte Ltd to reflect its new shareholding.

4 A shareholders’ agreement between the petitioner, Infocomm, Henry Ho and Charlie Ho was entered into on 23 January 2003 (“the shareholders’ agreement”).Under the shareholders’ agreement, the “A Shareholder” was defined to mean Charlie Ho and Henry Ho collectively and the “B Shareholder” was defined to collectively refer to the petitioner, Infocomm and Tan Lyn-Li.

5 Under cl 3.1 of the shareholders’ agreement, A Shareholder was entitled to appoint five directors and B Shareholder was entitled to appoint seven directors to the board of directors of the company. Under cl 3.6 of the shareholders’ agreement, no meeting of the Board could proceed to business unless a quorum was present at the start of the meeting, and that quorum had to consist of one director nominated by A Shareholder and one by B Shareholder. A meeting had to be adjourned if the quorum was not met, and only at the adjourned meeting could the quorum consist of any two directors.

6 Under cl 3.8 of the shareholders’ agreement, a resolution of the Board was validly passed if the text of the resolution had been signed or approved by each director or his alternate. Under cl 4.1, matters requiring a supermajority vote of 75% of the total issued share capital included:

(a) the admission of any person or entity, whether by subscription for or transfer of shares, as a shareholder holding 5% or more of the issued share capital of the company;

(b) the opening or closing of any bank account; and

(c) changing the terms of the mandate of any bank account.

As a result of cl 4.1 of the agreement, there were two cheque signatories for the company, with one signatory nominated by A Shareholder and the other by B Shareholder. Representatives from A and B Shareholders were also given access to the company’s internet banking facilities.

7 The five directors appointed by A Shareholder were Charlie Ho, Henry Ho, Wong Wai Leng, Low Eu Koon Jennifer and Tan Swee Giok. The seven directors appointed by B shareholder were Gene Ng Kean Gene, Low Jiunn Wei, Kenneth, Lewis Tan Liu Shen, Low Yih Wen, Christopher, Lee Fook Chiew, Brian, Cheng-Jean Chen (subsequently replaced by Tan Geok Leng) and Benjamin Gan Beng Chwee.

8 I now turn to consider each ground on which the petitioner relied in asking this court to wind up the company.

The company is unable to pay its debts

Allegations by the petitioner

9 According to the petitioner, the company had purchased software from Symantec Singapore Pte Ltd (“Symantec”) on 19 September 2003 amounting to $2,240,890 for onward sale to the Ministry of Defence. The payments were to be made in 12 instalments. The company was to collect payments from the Ministry of Defence, deduct 2% for itself and forward the balance to Symantec.

10 For reasons unknown to the petitioner, the company became indebted to Symantec for the sum of US$550,000 as at 11 October 2005. This debt was in addition to the sum that was due to be paid to Symantec on 15 September 2005. The company then entered into an instalment plan to repay this debt.

11 Symantec’s representative, one Alex Poon Tuck Wai (“Alex Poon”), gave evidence that the company had defaulted on the instalment plan and now owes Symantec US$90,000. This figure does not take into consideration the instalment payments due after March 2006. Further, the company still owed Symantec $827,280 relating to the original payment plan for the deal involving the Ministry of Defence. These moneys remain outstanding despite the fact that the company had received payments from the Ministry of Defence. Symantec has demanded payment from the company.

Arguments by the respondent

12 The respondent company contended that it is not insolvent and that it will be able to repay the company’s debts as and when they become due. In particular, Symantec, which is the company’s main creditor, has agreed to a three-year plan which the company is presently servicing. Further, the company has reduced its expenses from a high of $110,580 per month in December 2004 to $24,197 per month in January 2006.

The relevant law

13 Section 254(1) of the Companies Act provides an exhaustive list of grounds on which the court may make an order for a company to be wound up. Under s 254(1)(e), winding-up may be granted if a company is unable to pay its debts. As a general rule, a company is insolvent when it cannot meet its obligations, actual or contingent, as and when they fall due. Additionally, s 254(2) provides a deeming provision for when a company is considered to be unable to pay its debts:

Definition of inability to pay debts.

(2) A company shall be deemed to be unable to pay its debts if —

(a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding $10,000 then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorised requiring the company to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor;

(b) execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) it is proved to the satisfaction of the Court that the company is unable to pay its debts; and in determining whether a company is unable to pay its debts the Court shall take into account the contingent and prospective liabilities of the company.

[emphasis added]

Findings of this court

14 Having assessed the evidence before me, I was of the view that the company was unable to pay its debts. In coming to this conclusion, I took note of the fact that the three-year instalment plan reached with Symantec was not for all outstanding debts, but only for debts owing before 15 September 2005.

15 Further, I accepted the petitioner’s evidence that the company was using payments received from the Ministry of Defence to fund its own operations, rather than forwarding the moneys received to Symantec. The company’s balance sheet did not take into account the fact that the company still owed more than $800,000 to Symantec.

16 Additionally, the testimony of Alex Poon made clear that no agreement had been reached between Symantec and the company with regard to paying off the outstanding debts in one lump sum and those negotiations had been called off. Further, Alex Poon stated that as of January 2006, he was no longer confident that the company could repay its debts.

17 In these circumstances, I was of the view that the company should be wound up under s 254(1)(e) of the Companies Act.

Winding-up under s 254(1)(f) and 254(1)(i) of the Companies Act

18 Section...

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2 cases
  • EQ Capital Investments Ltd v The Wellness Group Pte Ltd
    • Singapore
    • High Court (Singapore)
    • 25 June 2019
    ...uphold or sustain having regard to all the circumstances. See Re HL Sensecurity Pte Ltd (formerly known as HL Integral Systems Pte Ltd) [2006] SGHC 135 at [28]. As for s 254(1)(i), it is well established that the “notion of unfairness is the foundation of the court’s jurisdiction under s 25......
  • Poh Leong Soon v SL Hair & Beauty Slimming Centre Pte Ltd
    • Singapore
    • High Court (Singapore)
    • 27 April 2018
    ...of the Companies Act. As observed by the High Court in Re HL Sensecurity Pte Ltd (formerly known as HL Integral Systems Pte Ltd [2006] SGHC 135 at [28], it is a rarely used provision, and has two constituent parts. The first part applies when the directors are shown to have preferred their ......
2 books & journal articles
  • Case Note - SHARE BUY-OUT IN A DEADLOCK SITUATION
    • Singapore
    • Singapore Academy of Law Journal No. 2020, December 2020
    • 1 December 2020
    ...or in any other manner whatever which appears to be unfair or unjust to other members”. It was pointed out in Re HL Sensecurity Pte Ltd [2006] SGHC 135 that in view of the significant overlap of its scope with s 216, this provision is seldom used. The focus of this case note is on winding u......
  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2006, December 2006
    • 1 December 2006
    ...L P Thean J (as he then was) accepted this common law rule as part of the law of Singapore. 15.6 In Re HL Sensecurity Pte Ltd[2006] SGHC 135, a shareholder of a company applied to the court for a winding-up order against the company on the ground, inter alia, that the company was unable to ......

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