Zhejiang Crystal-Optech v Crystal-Moveon: Winding Up for Loss of Substratum & Failure to Commence Business
In the General Division of the High Court of Singapore, Zhejiang Crystal-Optech Co Ltd sought to wind up Crystal-Moveon Technologies Pte Ltd, a joint venture in which it held a 60% stake. Moveon Technologies Pte Ltd, the minority shareholder, opposed the application. Hri Kumar Nair J granted the application, finding that the company had lost its substratum after the failure of Project Viserion and Project Sphinx, and had suspended its business for over a year. The court also rejected Moveon's arguments that the application was an abuse of process. The court ordered the winding up of the company.
1. Case Overview
1.1 Court
General Division of the High Court1.2 Outcome
Winding up of the company ordered.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court orders Crystal-Moveon Technologies wound up due to loss of substratum and failure to commence business, despite minority shareholder opposition.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Zhejiang Crystal-Optech Co Ltd | Claimant | Corporation | Winding up of the company ordered | Won | |
| Crystal-Moveon Technologies Pte Ltd | Defendant | Corporation | Company ordered to be wound up | Lost | |
| Moveon Technologies Pte Ltd | Non-party | Corporation | Application dismissed | Neutral | |
| Nixfol Pte Ltd | Non-party | Corporation | Application dismissed | Neutral |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Hri Kumar Nair | Judge of the High Court | Yes |
4. Counsels
4. Facts
- Zhejiang Crystal-Optech Co Ltd owns 60% of Crystal-Moveon Technologies Pte Ltd.
- Moveon Technologies Pte Ltd owns 40% of Crystal-Moveon Technologies Pte Ltd.
- The joint venture was initially for Project Viserion, to mass produce polymer lenses for Apple.
- Apple terminated Project Viserion before any production took place.
- The board of the Company agreed to work on a tender for Project Sphinx, which was also later terminated by Apple.
- Zhejiang offered to sell its shares to Moveon for US$6m, but Moveon did not accept the offer.
- Moveon commenced OC 421 against the Company for US$9,953,522.25 and S$5,650,026.78.
5. Formal Citations
- Zhejiang Crystal-Optech Co Ltd v Crystal-Moveon Technologies Pte Ltd, Companies Winding Up No 221 of 2023, [2024] SGHC 87
6. Timeline
| Date | Event |
|---|---|
| Defendant incorporated in Singapore | |
| Apple informed the Company that it would not be engaged for Project Viserion | |
| Company terminated employment of three employees | |
| Company’s board passed a resolution approving the proposed budget for the Company to undertake preparatory work for Project Sphinx | |
| Apple terminated Project Sphinx | |
| Moveon commenced OC 421 against the Company | |
| Nixfol Pte Ltd commenced DC/OC 932/2023 against the Company | |
| Zhejiang purportedly invoked the share transfer mechanism in the Company’s Constitution | |
| Zhejiang filed application to wind up the Company | |
| Judgment delivered | |
| Judgment date |
7. Legal Issues
- Grounds for Winding Up Petition
- Outcome: The court found that the company had lost its substratum and had suspended its business for more than a year, thus establishing grounds for winding up.
- Category: Substantive
- Sub-Issues:
- Failure to commence business within a year of incorporation
- Suspending business for a whole year
- Loss of substratum
- Just and Equitable Ground for Winding Up
- Outcome: The court found that it was just and equitable to wind up the company because it had lost its substratum.
- Category: Substantive
- Sub-Issues:
- Loss of substratum
- Irretrievable breakdown of relationship
- Abuse of Process
- Outcome: The court rejected the argument that the application was an abuse of process.
- Category: Procedural
- Availability of Alternative Buy-Out Mechanism
- Outcome: The court found that Zhejiang had attempted to invoke the share buy-out mechanism in the Company’s Constitution.
- Category: Procedural
- Court's Discretion in Winding Up
- Outcome: The court exercised its discretion to wind up the company.
- Category: Procedural
8. Remedies Sought
- Winding Up Order
9. Cause of Actions
- Winding Up
10. Practice Areas
- Commercial Litigation
- Insolvency Law
11. Industries
- Manufacturing
- Technology
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Ma Wai Fong Kathryn v Trillion Investment Pte Ltd | Court of Appeal | Yes | [2019] 1 SLR 1046 | Singapore | Cited for the two scenarios where the loss of substratum argument is available to justify winding up a company. |
| Re Goodwealth Trading Pte Ltd | N/A | Yes | [1990] 2 SLR(R) 691 | Singapore | Cited for the principle that a member may petition for winding-up when the company is no longer able to carry on its main object. |
| Perennial (Capitol) Pte Ltd v Capitol Investment Holdings Pte Ltd | N/A | Yes | [2018] 1 SLR 763 | Singapore | Cited for the principle that the court may reject a winding up application where the petitioner fails to invoke a viable buyout mechanism. |
| Ng Sing King v PSA International Pte Ltd | N/A | Yes | [2005] 2 SLR(R) 56 | Singapore | Cited for the situation where the loss of substratum argument is available to an aggrieved shareholder where the company is effectively dormant and its finances are poor. |
| Foo Peow Yong Douglas v ERC Prime II Pte Ltd and another appeal and other matters | N/A | Yes | [2018] 2 SLR 1337 | Singapore | Cited for the principle that the Court retains the discretion to make a winding up order. |
| Lai Shit Har and another v Lau Yu Man | N/A | No | [2008] 4 SLR(R) 348 | Singapore | Cited for the principle that the court may reject the winding up application where it is brought for a collateral purpose such as to amount to an abuse of process. |
| Perennial (Capitol) Pte Ltd and another v Capitol Investment Holdings Pte Ltd and other appeals | N/A | Yes | [2018] 1 SLR 763 | Singapore | Cited for the principle that the court may reject the winding up application where the petitioner fails to invoke a viable buyout mechanism. |
| Ting Shwu Ping (administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd and another appeal | N/A | Yes | [2017] 1 SLR 95 | Singapore | Cited for the principle that the court may reject the winding up application where the petitioner fails to invoke a viable buyout mechanism. |
| In the Matter of the Companies Ordinance, Cap 32 and in the Matter of Power Point Engineering Limited | N/A | No | [2000] HKCU 501 | Hong Kong | Cited for the proposition that where the relevant misconduct of the petitioners was causative of the circumstances giving rise to the discretion, prima facie, the absence of clean hands would disentitle the petitioners to the relief sought. |
| Grimmett, Andrew and others v HTL International Holdings Pte Ltd | N/A | No | [2022] 5 SLR 991 | Singapore | Cited for principles in relation to s 125(1)(c) IRDA. |
| Lau Yu Man v Wellmix Organics (International) Pte Ltd | High Court | No | [2007] SGHC 96 | Singapore | Cited for the principle that the company's business had not been suspended because it, amongst other things, continued to receive mail. |
| Fustar Chemicals Ltd (Hong Kong) v Liquidator of Fustar Chemicals Pte Ltd | N/A | Yes | [2009] 4 SLR(R) 458 | Singapore | Cited for the principle that the liquidator will be subject to the supervision of this Court and bound by law to act independently and fairly, ensuring that the Company’s affairs – including any litigation – are conducted in the interests of the Company and its creditors. |
| Pham Thai Duc v PTS Australian Distributor Pty Ltd | N/A | Yes | [2005] NSWSC 98 | New South Wales | Cited for the principle that the liquidator will be subject to the supervision of this Court and bound by law to act independently and fairly, ensuring that the Company’s affairs – including any litigation – are conducted in the interests of the Company and its creditors. |
| Re Madrid and Valencia Railway Co | N/A | Yes | [1850] 19 LJ Ch 260 | N/A | Cited for the principle that the court will enquire whether the business has been abandoned in its entirety, either wilfully or simply due to the inability to carry on trading for other reasons. |
| Re Tomlin Patent Horse Shoe Co Ltd | N/A | No | (1886) 55 LT 314 | N/A | Cited for the principle that there is no suspension of business when the cessation of business activities can be satisfactorily explained on other grounds. |
| Re Middlesborough Assembly Rooms Co | N/A | No | Re Middlesborough | N/A | Cited for the principle that the petition will generally be dismissed if the majority of shareholders are opposed to winding up and the company’s inactivity can be explained. |
| Re Metropolitan Railway Warehousing Co Ltd | N/A | No | (1867) 36 LJ Ch 827 | N/A | Cited for the principle that the petition will generally be dismissed if the majority of shareholders are opposed to winding up and the company’s inactivity can be explained. |
| Re Middlesborough Assembly Rooms Co | N/A | No | (1880) 14 Ch D 104 | N/A | Cited for the principle that the court has a discretion as to whether it will make a winding-up order. |
| Re Metropolitan Railway Warehousing Co Ltd | N/A | No | (1867) 15 WR 1121 | N/A | Cited for the principle that the court has a discretion as to whether it will make a winding-up order. |
| Devmin International Pty Ltd v Belconnen Developments Pty Ltd | N/A | Yes | (2022) 12 QR 170 | Australia | Cited for the principle that the court has a discretion as to whether it will make a winding-up order. |
| In the Matter of the Companies Ordinance, Cap 32 and in the Matter of Power Point Engineering Limited | N/A | No | [2000] HKCFI 800 | Hong Kong | Cited for the principle that the court has a discretion as to whether it will make a winding-up order. |
| BNP Paribas v Jurong Shipyard Pte Ltd | N/A | Yes | [2009] 2 SLR(R) 949 | Singapore | Cited for the principle that the court retains the discretion to deny the winding up of a company, having regard to all relevant factors. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| s 125(1)(c) of the Insolvency, Restructuring and Dissolution Act 2018 | Singapore |
| s 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018 | Singapore |
| s 133(1) IRDA | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Companies Act 1967 | Singapore |
| s 177(1)(b) of the Companies Ordinance (Cap 32) (HK) | Hong Kong |
15. Key Terms and Keywords
15.1 Key Terms
- Winding up
- Loss of substratum
- Joint venture
- Shareholder dispute
- Abuse of process
- Buy-out mechanism
- Project Viserion
- Project Sphinx
- Insolvency
- Liquidation
15.2 Keywords
- Winding up
- Insolvency
- Shareholder dispute
- Loss of substratum
- Singapore
- Companies Act
- IRDA
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Winding Up | 95 |
| Insolvency Law | 90 |
| Corporate Law | 60 |
| Commercial Disputes | 40 |
| Shareholder Disputes | 35 |
| Civil Procedure | 30 |
16. Subjects
- Insolvency
- Company Law
- Winding Up