Summary

The High Court Hong Kong’s recent ruling in Liu Qiuhua v. Xiang Xin and Others [2025] HKCFI 1048 exposed critical mis-steps by directors attempting to block minority shareholders from requisitioning an EGM for the purpose of considering and passing resolutions to reconstitute the board of directors of a HK listed company. This note attempts to dissect the tactics adopted by the directors of Elife Holdings Limited (223.HK), analyze the legal consequences for its directors, and provide actionable takeaways for companies to avoid similar pitfalls. By balancing shareholder rights with directorial accountability, businesses can mitigate litigation risks while maintaining governance integrity. 

Elife’s tactics to block shareholder requisition

The directors of Elife Holdings Limited (the “Company”) engaged in a series of maneuvers to obstruct minority shareholders from requisitioning an EGM to be held for the purpose of considering and passing resolutions to reconstitute the board of directors of the Company. Below is a brief chronology: 

The Company was incorporated in the Cayman Islands and its shares are listed on the HKEx.

• In November 2016, the Plaintiff owned 717,634,000 shares in the Company, representing approximately 14.85% of the then shareholding of the Company. 
• The Plaintiff’s status and rights as shareholder have never been questioned by the Company or directors since it first became a shareholder of the Company.
• On 20 August 2024: A group of shareholders (including the Plaintiff) lodged a requisition (the “1st Requisition“), demanding an EGM to remove and replace the board.  
• On 21 August 2024: The Company publicly acknowledged the requisition but took no steps to convene the EGM. 
• On 30 August 2024: The Company rejected the 1st Requisition, claiming the shareholders were not “registered members.” 
• On 15 September 2024: The Company issued approximately 16.66% new shares to China Innovation Investment Limited (a entity of which D1 served as a director) at a discount, diluting existing shareholders. 
• On 25 October 2024: Six shareholders including the Plaintiff submitted another requisition (the “2nd Requisition“), representing approximately 10.76% of issued shares of the Company.
• On 14 November 2024: The Company issued an EGM notice for 24 December 2024 but later further postponed the process. 

Subsequent steps taken by the Company 

• On 21 November 2024:  The Company Announced a rights issue excluding Mainland / Macau shareholders (targeting the requisitionists).
• On 5 December 2024:  The Company issued investigatory notices under the Securities and Futures Ordinance, questioning shareholders’ funding sources. 
• On 12 December 2024:  The Company alleged requisitionists violated PRC foreign exchange control resolutions, contending that the purchase of their shares are void.
• On 20 December 2024: D1 to D9 (the directors of the Company) resolved to postpone the EGM to 6 January 2025, stating that to “protect the interests of the Company” in light of the need to review the information in relation to the allegations (“1^st Decision”).
• On 23 December 2024: Appointed 5 new directors (being D10 to D14 in the case).
• On 27 December 2024: Adjourned the EGM sine die and instituted lawsuits against requisitionists in Mainland courts (“2^nd Decision”).  

Legal actions taken by the Plaintiff

On 7 January 2025: The Plaintiff filed an originating summons (the “OS“) seeking:

• A declaration that each of the 1^st Decision and the 2^nd Decision was made for improper purposes and/or in breach of their fiduciary duties;
• A declaration that the Requisitionists have the right to hold the EGM themselves pursuant to articles of association of the Company;
• A mandatory injunction requiring the directors of the Company and the Company to give notice to resume the EGM to be held within 14 days for the purpose of considering the proposed resolutions; and
• A prohibitory injunction to restrain the directors of the Company and the Company from (a) delaying, adjourning or otherwise interfering with the convening, holding or the conduct of the EGM; (b) the consideration of the Proposed Resolutions; and (c) interfering with, not admitting or disallowing any votes cast at the EGM by the Plaintiff or her proxy.

On 7 January 2025:  The Plaintiff filed a summons to seek permanent injunction on the same terms as the OS.

Directors’ response to legal actions taken by the Plaintiff

The legal team representing the directors of the Company (save for D6) argued that the Court should not grant any injunction against the Company or the directors of the Company, and should give directions on filing of evidence.

Court’s ruling and actions taken by certain directors afterwards

• Court held that directions were given on filing of evidence  in respect of the OS and the Summons – to be heard on 21 February 2025.
• 20 January 2025: D4-D5, and D7-D9 – informed that they would not be opposing the OS and the Summons.
• 1 February 2025: D11, D13 and D14 – confirmed that they would not be opposing the OS and the Summons.
• D1-D3, D10 and D12 contended that the EGM should be resumed subject to the condition that the Requisitionists have to change their proposed candidates for executive directors, who are residents in the Mainland, to persons who are residents in Hong Kong. 

Court’s Decision

On 21 February 2025: The High Court ruled the directors’ actions were made for improper purposes, and voidable.

Under sections 728 to 730 of the Companies Ordinance, a member of a company (including a non-Hong Kong company) may apply for an injunction to restrain or require a person to do any act or thing if that person is engaging in conduct that constitutes a breach of fiduciary or other duties as a director owed to the company or a breach of the company’s articles. 

In this case, the interlocutory injunction sought by the Plaintiff is one which, if granted, would have the effect of finally disposing of the matter, the Court would examine the merits more closely and take account of the parties’ respective prospects of success in establishing or defeating the claim. 

The Court held that the 1^st and 2^nd Decisions were made by the directors in breach of their fiduciary duties for the following reasons:

1. Violation of PRC foreign control exchange regulations would not affect the status of the Requisitionists as shareholders and their right to vote at the EGM; and

2. Having regarded to the fact that:

• The Plaintiff had been a substantial shareholder of the Company since 2016 – without being questioned by the Company for over 8 years.
• After the 1^st Requisition lodged with the Company, within 10 days, D1-D9 caused the Company to issue substantial number of new shares to China Innovation at a discount.
• On 5 December 2024, D1-D9 suddenly decided to investigate the shares subscribed by the Plaintiff 8 years ago.
• D1 – D9 tried to implement the rights issues designed to exclude the overseas shareholders, including the Requisitionists.

Consequences for Elife’s directors

The Court imposed severe penalties on Elife’s directors, underscoring the risks of prioritizing self-interest over shareholder rights: 

1. Personal Cost Liability: D1–D5, D7–D14 were ordered to pay the Plaintiff’s legal costs personally, barred from seeking indemnification from the Company. D4–D5, D7–D9 incurred liability up to 20 January 2025; D11, D13–D14 up to 1 February 2025. 

2. Reputational Damage: Public judgments (e.g., [2025] HKCFI 1048) permanently tarnish professional reputations. Public announcements exposed governance failures to investors and regulators. 

3. Invalidation of Defensive Measures: The proposed rights issue, share issuance to China Innovation, and EGM adjournments were declared voidable.  Further, newly appointed directors (D10–D14) lost legitimacy, destabilizing board operations. 

4. Regulatory Scrutiny: The SFC and HKEx might inquire into whether there are any breaches of Listing Rules. 

Strategies for companies – protecting governance without endangering directors

Companies should consider adopting the following legally compliant strategies:

1. Respect shareholder rights: 

EGM Compliance: Convene EGMs within statutory timelines.

2. Avoid conflicts of interest

Independent decisions: Exclude conflicted directors from votes on related-party transactions.  Engage in non-selective dilution, if needed.

3. Obtain independent legal advice.

Conduct pre-action due diligence, and maintain records proving directors acted in the Company’s best interests.

4. Litigation readiness

Adopt and implement strategies in advance.

Final note

This case showed that Hong Kong courts will not tolerate abusive tactics against shareholders.  By prioritising transparency, independent governance, and adoption of relevant strategies, companies can protect their interests without jeopardising directors’ interests.

Contact us today to learn  how our team can help you navigate the complex legal and regulatory landscape.

Alfred Leung, Partner

(alfredleung@hkytl.com; T: +852  3468 7202)

This article is introductory in nature. Its content is current at the date of publication.  It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this article. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.