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Hong Kong Insolvency Law: Court of First Instance dismisses winding up petition, finding a triable issue over the petitioner’s unlicensed money lender status which may render the loan unenforceable

The Court of First Instance gave judgment in Re Florescent Holdings Ltd. [2022] HKCFI 649 on 8 March 2022, dismissing the winding up petition against Florescent Holdings Ltd. (the “Company”), a BVI company and the controlling shareholder of Huazhang Technology Holding Limited (the “Listco”), a company listed on the Hong Kong Stock Exchange. The learned Judge found a triable issue as to whether the petitioner was carrying on business as an unlicensed money lender which may render the loan unenforceable under section 23 of the Money Lenders Ordinance, Cap. 163. Tara Liao acted for the Company.

The petition is based on a financing arrangement whereby the petitioner (a BVI company) acting jointly with Kaiser Financing Company Limited (“Kaiser”), a licensed Hong Kong money lender, advanced a total of HK$250,000,000 to the Company, which was secured by a pledge over the Company’s 411,872,000 shares in the Listco. The petitioner’s case is that it advanced HK$200,000,000 (the “Loan”) and Kaiser advanced HK$50,000,000 to the Company.

At the heart of the dispute is whether in advancing the Loan, the petitioner was carrying on business as an unlicensed money lender in contravention of sections 2 and 23 of the Money Lenders Ordinance, Cap. 163 (“MLO”), and whether any exemptions apply. The petitioner denies carrying on business as a money lender, and in the alternative relies on the exemptions under paragraphs 2(b)(ii) and 5 of Part 2, Schedule 1 of the MLO in that (1) its primary business is not that of making loans but that of investment holding and the Loan was made in the course of its primary business, and/or (2) the pledge over the shares owned by the Company was a floating charge.

Under Section 23 of the MLO, in the absence of any applicable exemptions under the MLO, any loan or security agreement entered into by an unlicensed money lender is prima facie unenforceable, subject to any discretionary relief which may be granted by the Court.

The Court found that on the evidence of this case, there is a triable issue as to whether the petitioner was carrying on business as an unlicensed money lender, noting that in appropriate circumstances, even one transaction (such as this case) may be sufficient to constitute carrying on business as a money lender. In coming to this view, the Court took into account inter alia the significant amount of the Loan and the interest rate, the fact that the interest generated from the Loan accounted for more than 98% of its annual revenue in 2018 and 2019, and that the petitioner was acting jointly with a licensed money lender in the transaction.

The Court further found that the exemptions relied on by the petitioner did not apply:

• The exemption under Paragraph 5 of Part 2, Schedule 1 of the MLO consists of two limbs, i.e. its primary business is not that of making loans, and the loan in question is made in the ordinary course of that primary business. Even assuming the petitioner’s primary business is that of investment holding, there is no evidence that the Loan was made in the ordinary course of that business;

• Whether a charge is a fixed charge or a floating charge is to be determined by interpretation of the instruments creating it. On the face of the instruments creating the pledge, the pledge was over a fixed rather than a fluctuating body of assets, and the Company was prohibited from disposing of the pledged shares without the petitioner’s consent. The pledge was therefore a fixed charge.

Having found there being a triable issue of whether the petitioner was an unlicensed money lender, the Court held that there are triable issues of whether relief should be granted to the petitioner under the proviso of section 23 of the MLO.

The Court further found there to be a triable issue as to whether the petitioner charged excessive default interest in contravention of section 22 of the MLO and that Kaiser did not in fact advance any loan to the Company, as a result of which the 3rd core requirement for the Court to wind up a foreign company is not satisfied.

This case elucidates the principles underlying the statutory control imposed on money lenders under the MLO and in particular the application of sections 2, 22, 23 and the exemptions of Schedule 1 of the MLO in the context of a winding up petition, as well as the distinction between a fixed charge and a floating charge.



Tara Liao, instructed by Stevenson, Wong & Co., acted for the successful Respondent (the Company).

Tara Liao

“Tara is intellectually very sharp. A very practical and effective junior with a meticulous eye.”
Legal 500 Asia-Pacific 2021 & 2022, Commercial Disputes — Leading Juniors

As counsel, Tara appears regularly in the Court of Appeal, the High Court, the District Court and in arbitrations with a focus on commercial injunctions, shareholders’ disputes, company, insolvency, civil fraud, trust and cross-border disputes. She also has experience in land, competition, insurance and regulatory cases. She sat as a Deputy District Judge in 2021. She is a Committee member of HK45, an active young arbitration practitioners group in Asia.

Prior to joining the Bar, she was a solicitor in an international law firm specialising in commercial litigation and regulatory matters. She holds a bachelor degree in PRC laws from Peking University and has passed the PRC National Judicial Examination.

Tara began full practice as a barrister in 2015 after completing pupillages with Mr Philip Dykes SC, Mr Richard Khaw SC, Mr Derek C.L. Chan SC and Mr Roger Beresford.

Visit Tara’s profile for more details.

This article was first published on 12 May 2022.

Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photograph which appears in this article is included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related.