Are Share Certificates Assets? DLA Piper Secures Dismissal of Committal Proceedings

Introduction

A recent decision of the Hong Kong Court of First Instance (Court) in committal proceedings, Yao Guoliang and Another v Forever Winner International Ltd and Others [2026] HKCFI 1146, provides important guidance on the proper construction of undertakings given to the Court.  In particular, the judgment addresses whether the term “assets” in an undertaking extends to mere share certificates, and whether “dealing with assets” encompasses the mere movement of such share certificates.  The Court reaffirmed a substance‑driven approach to the interpretation of undertakings.  DLA Piper Hong Kong acted for Mr Wang Jian Sheng (Mr Wang) and successfully resisted the contempt application brought by Mr Yao Guoliang (Mr Yao) and Jin Yao Holdings Limited (Jin Yao).

The recent judgment forms part of the wider boardroom disputes between Mr Wang and Mr Yao since 2024, as reflected in an earlier decision of the Court in separate proceedings (EGM Proceedings), Sino Century Holdings Ltd and Others v Strong Petrochemical Holdings Ltd and Others [2025] HKCFI 456.  In the EGM Proceedings, DLA Piper Hong Kong acted for, inter alia, Mr Wang and successfully obtained injunctive relief requiring, among other things, a Hong Kong listed company, Strong Petrochemical Holdings Limited (海峽石油化工控股有限公司) (SPHL), to convene an extraordinary general meeting (EGM), and restraining any person from purporting to exercise the voting rights attaching to the 49% shareholding held by Forever Winner International Limited (Forever Winner) in SPHL pending determination of Forever Winner’s internal disputes before the BVI court.

The DLA Piper team representing Mr Wang is led by Harris Chan (Partner), assisted by Rita Chow (Senior Associate) and Sapphira Choi (Associate).

 

The Committal Proceedings: Whether Share Certificates Constitute “Assets” under an Undertaking

The Committal Proceedings arose from an undertaking given by Mr Wang in proceedings commenced by Mr Yao and Jin Yao in 2024, which required Mr Wang to disclose whether any “assets” of Forever Winner – a BVI company jointly and equally owned by Mr Wang and Mr Yao – had been dealt with during a defined period.  Mr Yao and Jin Yao alleged that Mr Wang failed to disclose, in his affirmation filed pursuant to the undertaking, that share certificates representing part of Forever Winner’s registered shareholding in SPHL had been withdrawn from bank custody, and contended that this amounted to both a breach of the undertaking and a false statement on oath.

The Court rejected that characterisation, holding that neither the share certificates constituted “assets” nor their mere movement amounted to “dealing with assets” under the undertaking:  

1. The shares in question were registered shares, not bearer shares, meaning that as a matter of law and the articles of association of SPHL, what would matter would be who were the registered member of the shares on the register of members and the rights on the shares, rather than the mere share certificates which would not entitle the holder of the share certificates (as opposed to the shares) to exercise any rights on the shares.
2. While in theory, the share certificates could be pledged, practically, no one would really be willing merely to accept the share certificates in themselves without the shares as a pledge. The mere share certificates in themselves would have no value or no security to the pledgee at all. So understood, there would be nothing wrongful about the mere movement of the mere share certificates. This points towards the parties’ objective understanding that the mere movement of the mere share certificates, without more, would not be regarded as “dealing with assets”, and that the Court would not be concerned with any “dealing with assets” that would practically have no or de minimis consequence.
3. It is clear from evidence that Mr Yao was concerned with the shares rather than the mere share certificates or any dealing that would practically have no or de minimis consequence.
4. The above provide the context and purpose against which “assets” in the undertaking is to be construed. Textually, “assets” is not a term clearly to include or exclude mere share certificates. However, against such context and purpose, the Court takes the view that it is clear that “assets” does not include mere share certificates.
5. Further and in any event, if there is still any ambiguity in “assets” despite the context and purpose mentioned above, the ambiguity should be construed in favour of Mr Wang, and therefore, “assets” should be construed not to cover mere share certificates.

On that basis, the Court allowed Mr Wang’s application by setting aside the leave granted to Mr Yao and Jin Yao to pursue the Committal Proceedings and dismissing the contempt application, with the costs of the Committal Proceedings ordered to be paid by Mr Yao and Jin Yao to Mr Wang.

 

The EGM Proceedings: Adjournment of EGM and Voting Rights Deadlock

In the EGM Proceedings, the Court addressed repeated adjournments of SPHL’s EGM, which were said to be justified by the then chairperson’s misapprehension that Mr Yao (as he contended) was entitled, acting alone, to cause the 49% shareholding held by Forever Winner in SPHL to be voted at the EGM.  

The Court held that the premise relied upon to justify the adjournments was erroneous, as Mr Yao had himself accepted in an affirmation filed in the BVI proceedings that, due to the deadlock between himself and Mr Wang, no valid resolution could be passed by Forever Winner, with the necessary consequence that neither of them could exercise the voting rights attaching to the 49% shareholding held by Forever Winner.  The Court further emphasised that there was no justification for further delaying the holding of the EGM – the only mechanism by which shareholders could express their views and determine who should be appointed or remain as directors – by reason of Forever Winner’s internal disputes.  Accordingly, the Court allowed, inter alia, Mr Wang’s application by ordering the EGM to be re‑convened to enable shareholders to vote on the proposed resolutions, and restraining any person from purporting to exercise the voting rights attaching to Forever Winner’s 49% shareholding in SPHL pending determination of Forever Winner’s internal disputes before the BVI court.

 

Key Takeaways

In the context of the undertaking in question, the Court held that mere share certificates – distinct from the registered shares themselves – did not constitute “assets”, particularly where they conferred no rights and had no practical standalone value.  The decision in the Committal Proceedings reaffirmed that undertakings are interpreted in light of their context, purpose and practical effect, rather than by a purely literal reading, which underscores the high threshold for contempt applications and the Court’s reluctance to extend undertakings beyond their intended scope.

In the EGM proceedings, the Court reaffirmed that an EGM is the appropriate mechanism for shareholders to express views on board composition and corporate direction, and should not be delayed by collateral disputes.  The Court emphasised that internal disputes at shareholder level should not impede the proper functioning of listed‑company governance, including the timely holding of general meetings.  Where a shareholder entity is deadlocked, neither faction may unilaterally exercise voting rights attached to a substantial shareholding – an important clarification for boards assessing the validity of votes at general meetings. 

Judgments can be found hereinbelow

The Committal Proceedings – Yao Guoliang and Another v Forever Winner International Ltd and Others [2026] HKCFI 1146

The EGM Proceedings – Sino Century Holdings Ltd and Others v Strong Petrochemical Holdings Ltd and Others [2025] HKCFI 456