Apr 21, 2025 | Requesting the Directors of the Defendant Company to Provide their Company’s Accounting Records

1 When a Defendant limited company (the Defendant company) loses a lawsuit, the Court will usually order it to pay the Plaintiff’s attorney fees. If the Defendant company fails to pay, the Plaintiff can apply to the Court for the Defendant company to be wound up. Usually, liquidation may not be conducive to the Plaintiff, especially when the Defendant company has already deployed to make a cunning getaway. They may have already transferred their business, cash and clients to another limited company (a related company of the Defendant) to continue the operation.

2 In order to prevent the Defendant company in making a cunning getaway, the Plaintiff may consider constraining the person in charge of the Defendant company (usually the director) to provide the Plaintiff with the Defendant company’s accounting records and attend the Court hearing to be cross-examined by the Plaintiff’s lawyer. The purpose of auditing of the accounts of the Defendant company and cross-examining of the directors of the Defendant company by the Plaintiff was certainly for checking whether the Defendant had transferred any of its assets or made any transfers of unknown source two years prior to the hearing. Accordingly, Section 48 of Chapter 4 of the Hong Kong High Court Ordinance grants Plaintiffs the above statutory rights.

3 To successfully compel the directors of the Defendant company to provide their company’s accounting records and to appear in Court for cross-examination, the Plaintiff must apply to the Court for an order through the above regulations. According to the author’s experience, applying for an order is not rocket science. Instead, the most difficult part is actually delivering the Court order to the directors of the Defendant company by hand (i.e. Personal service).

4 In reality, the vast majority of directors of the Defendant company will evade Court orders. Although the Court usually requires the Plaintiff to deliver the Court order to the director of the Defendant company (“director”) by hand, as long as the Plaintiff has tried all methods of service to hand-deliver the Court order to the director, the Plaintiff can apply to the Court for substitute service (i.e. Substitute service) in accordance with Chapter 4 of the High Court Ordinance. Once the Court order substituted service (i.e. “Substitute service”), the director must provide the accounting records to the Plaintiff and appear in Court, otherwise the Plaintiff will apply to the Court for an order to commit the Defendant for contempt of court.

5 To obtain an order for “Substitute Service”, the Plaintiff needs to exhaust all possible means to contact the directors, including service by post and by hand to all the directors’ contact addresses, including email and phone number (Action 1). After the unsuccessful attempts to contact, the Plaintiff is also required to publish a notice on a Hong Kong public newspaper (Action 2). After completing the above Action 1 and 2, the Plaintiff may apply to the Court for “Substitute service”. As long as the Plaintiff completes all the procedures required by the Court, it is not difficult to obtain a Substitute Service Order from the Court.

6 On the other hand, given the various types of service actions taken by the Plaintiff, how could the directors of the Defendant company be unaware of the Plaintiff’s attack? As for how quickly the directors will surface and attend the hearing, it will all depends on their endurance.

7 Although escaping from attending the hearing may bring a brief peace to the directors, however they will soon be forced to appear in Court. If the directors still refused to attend the Court hearing, they are just simply asking for trouble. It is because when the Court issues a contempt of Court order against the directors, they will just be like fugitives dodging left and right. Bear in mind that one can only avoid temporary troubles, but no one can avoid them forever. Once the directors are arrested, they still have to appear in Court. By then, not only will they have to pay the Plaintiff’s legal fees, but they may also be sentenced to prison, depending on whether their explanations to Court are reasonable.

8 Through the above procedures, the Plaintiff can obtain the Defendant company’s annual accounting report and bank statements, etc. After the Plaintiff auditing the accounts of Defendant company, the Plaintiff can then cross-examine the directors in Court on the hearing day. It seems to the directors that cross-examination is not the end of the nightmare, but rather it may be the beginning of another torment, because the Plaintiff may seek to recover the debts transferred by the Defendant company to directors, shareholders or third parties, including debts owed by the Defendant’s related companies, under other relevant laws. For the directors, these coherent execution tasks were extremely annoying.

9 After knowing the above rights, the successful applicant (Plaintiff) can consult with lawyer the plan to exercise and access his or her due rights, which further prevent the Defendant company from escaping its responsibilities.