Kho Long Huat v Jian Rong Engineering: Share Buyout Dispute in Company Winding Up

In Kho Long Huat v Jian Rong Engineering Pte Ltd, the Singapore High Court addressed a dispute arising from a company winding-up application. Kho Long Huat, a 40% shareholder, initiated the winding-up of Jian Rong Engineering. The parties initially agreed to a consent order for a share buyout by the other two shareholders, Wang Duan Gang and Zhao Zhihua, but later disagreed on the terms. The court dismissed the company's application to set aside the consent order and ordered the share buyout, determining the terms to be fair and equitable. The court ordered Wang and Zhao to personally pay costs of $15,000 to Kho.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Application to set aside the Consent Order dismissed; Share Buyout ordered on terms determined by the court.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case involving a share buyout dispute in a company winding up. The court ordered a share buyout and dismissed the application to set aside the consent order.

1.7 Decision Date

25 August 2020

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Kho Long Huat	Plaintiff	Individual	Application to set aside the Consent Order dismissed; Share Buyout ordered on terms determined by the court.	Partial	Calvin Liang, Thio Ying Ying, Khoo Shuzhen Jolyn, Kuan Ling Hui Amy
Jian Rong Engineering Pte Ltd	Defendant	Corporation	Application to set aside the Consent Order dismissed; Share Buyout ordered on terms determined by the court.	Lost	Choo Zheng Xi, Wong Thai Yong, Choy Wing Kin Montague

3. Judges

Judge Name	Title	Delivered Judgment
Tan Siong Thye	Judge	Yes

4. Counsels

Counsel Name	Organization
Calvin Liang	Essex Court Chambers Duxton (Singapore Group Practice)
Thio Ying Ying	Kelvin Chia Partnership
Khoo Shuzhen Jolyn	Kelvin Chia Partnership
Kuan Ling Hui Amy	Kelvin Chia Partnership
Choo Zheng Xi	Peter Low & Choo LLC
Wong Thai Yong	Peter Low & Choo LLC
Choy Wing Kin Montague	Clifford Law LLP

4. Facts

Kho commenced winding-up proceedings against Jian Rong Engineering.
Kho, Wang, and Zhao are shareholders of Jian Rong Engineering.
The parties initially agreed to a consent order for a share buyout.
The parties disagreed on the terms of the share buyout.
The Company sought to set aside the Consent Order.
The court dismissed the application to set aside the Consent Order.
The court ordered the share buyout and determined its terms.

5. Formal Citations

Kho Long Huat v Jian Rong Engineering Pte Ltd, Companies Winding Up No 57 of 2019, [2020] SGHC 178

6. Timeline

Date	Event
2011-11-30	Jian Rong Engineering Pte Ltd incorporated.
2018-08-16	Kho Long Huat removed as Managing Director.
2019-03-29	Kho commenced Companies Winding Up No 57 of 2019.
2019-12-10	Consent Order entered that grounds for winding up the Company pursuant to ss 254(1)(f) and (i) of the Companies Act had been established.
2020-07-13	Court dismissed the application to set aside the Consent Order and ordered the Share Buyout.
2020-07-30	Company filed a Notice of Appeal against the decision.

7. Legal Issues

Setting Aside Consent Order
- Outcome: The court dismissed the application to set aside the Consent Order, finding that the grounds of mistake and/or inoperability were not proven.
- Category: Procedural
- Sub-Issues:
  - Mistake
  - Inoperability
- Related Cases:
  - [2007] 2 SLR(R) 770
Share Buyout Valuation
- Outcome: The court determined that the shares were to be valued on an earnings basis, without discounts for lack of control or marketability, and taking into account retention sums and monies owed to Kho.
- Category: Substantive
- Sub-Issues:
  - Basis of valuation
  - Discount for lack of control
  - Discount for lack of marketability
  - Treatment of retention sums
  - Monies owed to Kho by the Company
- Related Cases:
  - [2017] 1 SLR 95
  - [2020] 1 SLR 275
  - [2002] 2 BCLC 108
  - [2018] 4 SLR 425
  - [1999] 1 SLR(R) 773
Costs
- Outcome: The court ordered Wang and Zhao to personally pay costs of $15,000 to Kho.
- Category: Procedural
- Related Cases:
  - [2016] 2 SLR 118
  - [2010] 3 SLR 542

8. Remedies Sought

Winding Up Order
Share Buyout Order

9. Cause of Actions

Winding Up
Share Buyout

10. Practice Areas

Commercial Litigation
Corporate Law
Insolvency Law

11. Industries

Construction

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Ting Shwu Ping (administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd and another appeal	Court of Appeal	Yes	[2017] 1 SLR 95	Singapore	Cited for the principle that a buyout remedy under s 254(2A) depends on a finding that grounds for winding-up have been made out.
Hoban Steven Maurice Dixon and another v Scanlon Graeme John and others	Court of Appeal	Yes	[2007] 2 SLR(R) 770	Singapore	Cited and distinguished regarding the setting aside of a consent order where the independent expert valued the shares as “nil”.
Liew Kit Fah and others v Koh Keng Chew and others	Court of Appeal	Yes	[2020] 1 SLR 275	Singapore	Cited for the principle that what is “fair, just and equitable” must be decided on the facts of each case, based on the precise circumstances leading up to the sale of the shares and the ensuing need for valuation.
CVC/Opportunity Equity Partners Ltd and another v Demarco Almeida	Unknown	Yes	[2002] 2 BCLC 108	Unknown	Cited for the three possible bases for the valuation of minority shares.
Poh Fu Tek and others v Lee Shung Guan and others	High Court	Yes	[2018] 4 SLR 425	Singapore	Cited for the principle that the earnings basis of valuation is more appropriate where the company is a going concern.
Abhilash s/o Kunchian Krishnan v Yeo Hock Huat and another	High Court	Yes	[2018] SGHC 107	Singapore	Cited for the three possible bases for the valuation of minority shares.
Yeo Hung Khiang v Dickson Investment (Singapore) Pte Ltd and others	Court of Appeal	Yes	[1999] 1 SLR(R) 773	Singapore	Cited for the principle that the capitalisation of future maintainable earnings basis is more appropriate where the company is a profitable going concern.
Nam Fang Electrical Co Pte Ltd v City Developments Ltd	Unknown	Yes	[1996] 3 SLR(R) 298	Singapore	Cited for the principle that until the retention sum is actually applied towards disbursing the main contractor for the rectification of defects, the property in the retention sum resides with the Company.
Thio Syn Pyn v Thio Syn Kym Wendy and others and another appeal	Unknown	Yes	[2019] 1 SLR 1065	Singapore	Cited for the principle that a 2% shareholding will be considerably more valuable to an existing shareholder with 49% or 74% of a company’s shares than it will be to an outside investor.
Over & Over Ltd v Bonvests Holdings Ltd and another	Court of Appeal	Yes	[2010] 2 SLR 776	Singapore	Cited for the timeline given to the respondent to decide whether to purchase the appellant’s shares.
SIC College of Business and Technology Pte Ltd v Yeo Poh Siah and others	Court of Appeal	Yes	[2016] 2 SLR 118	Singapore	Cited for the principles on when non-party costs should be ordered.
DB Trustees (Hong Kong) Ltd v Consult Asia Pte Ltd and another appeal	Court of Appeal	Yes	[2010] 3 SLR 542	Singapore	Cited for the principles on when non-party costs should be ordered.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 2006 Rev Ed)	Singapore
Companies Act s 254(1)(f)	Singapore
Companies Act s 254(1)(i)	Singapore
Companies Act s 254(2A)	Singapore
Companies Act s 216(2)(d)	Singapore
Companies Act s 216(1)	Singapore
Companies Act s 26(1)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Share Buyout
Winding Up
Consent Order
Earnings Basis
Retention Sums
Discount for Lack of Control
Discount for Lack of Marketability
Independent Valuer
Fair Market Value
Companies Act

15.2 Keywords

Winding Up
Share Buyout
Consent Order
Valuation
Companies Act
Minority Shareholder
Oppression

16. Subjects

Company Law
Corporate Governance
Shareholder Disputes
Valuation

17. Areas of Law

Company Law
Winding Up
Civil Procedure
Shareholder Rights
Valuation Law