10 4 a candidates are expected to discuss the grounds

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4. (a) Candidates are expected to discuss the grounds for petition for winding up
under section 177 of the Companies (Winding Up & Miscellaneous
Provisions) Ordinance (Cap. 32).
Section 177(1) provides that a company may be wound up by the court if:
(a) the company has by special resolution resolved that the company be
wound up by the court;
(b) the company does not commence its business within a year from its
incorporation, or suspends its business for a whole year;
(c) the company has no members;
(d) the company is unable to pay its debts;
(e) the event, if any, occurs on the occurrence of which the articles provide
that the company is to be dissolved;
(f) the court is of opinion that it is just and equitable that the company should
be wound up.
Section 178(1) provides that a company shall be deemed to be unable to
pay its debts:
(a) if a creditor, by assignment or otherwise, to whom the company is
indebted in a sum then due that equals or exceeds the specified amount,
has served on the company a written demand in the prescribed form
requiring the company to pay the sum so due; and by leaving it at the
registered office of the company; and the company has, for three weeks
after the service of the demand, neglected to pay the sum, or to secure or
compound for it to the reasonable satisfaction of the creditor;
(b) if execution or other process issued on a judgment, decree or order of
any court in favour of a creditor of the company is returned unsatisfied in
whole or in part; or
(c) if it is proved to the satisfaction of the court that the company is unable
to pay its debts, and, in determining whether a company is unable to pay
its debts, the court shall take into account the contingent and prospective
liabilities of the company.
Section 177(3) provides that specified amount means the amount of
$10,000.
In our case, if the company owes Jenny $10,000 or more, Jenny may serve
a statutory demand to the registered office of the company and wait for
three weeks. If the company fails to repay the debt after 3 weeks, Jenny
may petition to wind up the company under section 177(1)(d).
(b) Candidates are expected to discuss the rules about separate legal entities
and lifting the corporate veil.
In law, registered companies are recognised as having their own legal
personality and can exist separate and distinct from their members and
managers. This was confirmed in Salomon v Salomon & Co Ltd [1897] AC
22 (and Section 73), which is probably the most famous case in company

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law. Even though it is a UK case the principle of law has been adopted in
Hong Kong
In Salomon v Salomon & Co Ltd [1897] AC 22, a man ran a shoe making
business as a sole trader but then sought to convert the business into the
form of a limited company. As the company was a separate legal entity from
its owners, the company had to pay Mr. Salomon for the value of the
business transferred to it from him. The company paid him partly in shares
in itself and partly by way of a secured loan from Mr. Salomon to it, which
it promised to repay at a later date. Before the company had repaid its debt
to Mr. Salomon, it went into insolvent liquidation. Mr. Salomon claimed all
the assets of the company to repay the loan but the other creditors said this
was all a fraud and that Mr. Salomon and the company were in reality the
same. Thus, they said Mr. Salomon should not have priority in to getting his
loan back. However, the court did not agree.