HK high court orders Jimmy Lai’s Next Digital to wind up under company laws
Published: Dec 15, 2021 09:08 PM
Next Digital Ltd and Apple Daily logos are display at the headquarters in Hong Kong, June 17, 2021. Photo: VCG

Next Digital Ltd and Apple Daily logos are display at the headquarters in Hong Kong, June 17, 2021. Photo: VCG

The High Court of the Hong Kong Special Administrative Region (HKSAR) on Wednesday has ordered Next Digital, the parent company of Apple Daily, founded by jailed Hong Kong secessionist Jimmy Lai, must be wound up according to relevant company laws, after a petition was presented in September. 

Financial Secretary Paul Chan Mo-po presented a petition to the Court of First Instance to wind up Next Digital Ltd on September 29, pursuant to the power conferred by the Companies Ordinance, according to a press release from the government of the HKSAR.

High Court judge Jack Wong Kin-tong granted the government's request after a brief hearing on Wednesday.

Next Digital is insolvent with a net loss of more than HK$240 million ($30.8 million), of which about HK$120 million is owed in wages to local staff, media reported, citing Clement Chan, who was appointed as the inspector to investigate the affairs of Next Digital on July 28. The investigation has found that Next Digital was involved in a number of questionable transactions.

The Hong Kong Securities and Futures Commission has separately been conducting extensive enquiries into Next Digital under the Securities and Futures Ordinance, and has provided to the financial secretary important information and evidence obtained through these enquiries, which are of relevance to the petition, read the HKSAR's government release in September.

The commission also believed that it is desirable in the public interest for Next Digital to be wound up, based on the information and evidence it has obtained.

Repayment to creditors will be prioritized upon liquidation of Next Digital. Employees of Next Digital will be given priority in compensation under the law, Hong Kong media said.

According to section 879 of the Companies Ordinance, the financial secretary may present a petition for a body corporate to be wound up if it appears to him from any specified materials that it is expedient in the public interest that a body corporate  which may be wound up under the Companies Ordinance  should be wound up.

"Given the proof provided, the liquidation of Next Digital is in line with the Companies Ordinance," a professor of law at the Renmin University of China told the Global Times on Wednesday.

The liquidation has sparked "concerns" in the island of Taiwan that shareholders' equity will be damaged, and that the personal information of employees and news databases of Next Digital's Taiwan Apple Daily will be taken for "improper use," media reported, citing Taiwan's "mainland affairs council."

"A company shall abide by the laws and regulations wherever it is registered. Next Digital's Taiwan unit will not be subject to Hong Kong's laws," said the professor. 

But the liquidation of the parent company, according to the shareholding structure, will inevitably affect the operation of subsidiaries. Therefore, Hong Kong's liquidators will consider Next Digital's subsidiary to be liquidated as an asset, which means Taiwan Apple Daily will be sold, the professor said.

Several companies were in talks with Next Digital in June to purchase its Taiwan Apple Daily, including Taiwan biomedical and cosmetic group Airlee. 

On April 19, Next Digital also tried to sell its Taiwan media business. However, the sale eventually fell through nine days later.

On June 24, the secessionist tabloid Apple Daily closed amid mounting financial pressure. Next Digital announced on September 5 that all board members had resigned and shares of the company remained suspended from trading. The company's shares had been halted from trading on June 17 and its bank accounts had been frozen. 

Lai, 73, was sentenced on Monday to another 13 months in prison over an unauthorized assembly in 2020. Lai is already serving prison terms of 20 months over three other unauthorized assemblies. 

He still faces multiple charges, including colluding with foreign forces and endangering national security.