The recent judgment in Re Proman International Limited¹ reaffirms the court's stance on the suitability of liquidators and the standards of disclosure required of them.

In the recent decision in Blockchain Group Company Limited (in liquidation) v. PKF Hong Kong Limited¹, Le Pichon DHCJ decided that despite an error resulting in a protective writ naming the defendant as a limited company and formerly a firm, the relevant provisions to amend a party’s name could not be used to essentially replace the limited company with the firm.

In a recent Court of First Instance decision in Re Shandong Chenming Paper Holdings Ltd [2023] HKCFI 2065 (Shandong Chenming), Harris J addressed the following issues which are important factors to be considered by creditors in strategising whether to opt for commencing winding-up proceedings against a debtor in recovering a debt, as well as by debtors in potentially raising cross-claims to defend a winding-up petition:

Introduction

In the landmark judgment by Linda Chan J in Re Gatecoin Ltd (in liquidation) [2023] HKCFI 914, the Court of First Instance held that cryptocurrencies were property under Hong Kong law capable of being held for distribution to creditors (or beneficiaries if they were trust assets) for the purposes of administrating an insolvent estate. In this article, the authors consider the Court’s ruling and its wider implications for the insolvency regime in Hong Kong, focusing on fraud claims and reviewable transactions in the cryptocurrency context.

In the recent case of Re Guangdong Overseas Construction Corporation [2023] HKCFI 1340 (17 May 2023), the Hon Linda Chan J confirmed the Hon Harris J’s decision in Re Global Brands Group Holding Ltd (in liquidation) [2022] 3 HKLRD 316 in introducing centre of main interest principles in assessing whether or not the Hong Kong court should recognise a foreign liquidation and assist a foreign office-holder.

In Re Guy Kwok-Hung Lam v. Tor Asia Credit Master Fund LP [2023] HKCFA 9, the Court of Final Appeal (CFA) handed down a decision in an appeal concerning the appropriate exercise, by the Court of First Instance (CFI), of the discretion to decline the exercise of jurisdiction in bankruptcy and insolvency matters on forum grounds, specifically, where the underlying dispute regarding the petition debt is the subject of an exclusive jurisdiction clause (EJC).

Background

Directors who oppose the winding-up of an insolvent company in the hope that a restructuring proposal would come to fruition should tread carefully and consider seriously whether to put the company into liquidation.

An exclusive jurisdiction clause (EJC) is a clause in a contract limiting the determination of disputes under that contract to one agreed jurisdiction or forum. It has been unclear whether an EJC could be relied upon to dispute a debt in the context of bankruptcy proceedings. It is trite that a bona fide dispute on the debt on substantial grounds is sufficient for a bankruptcy or winding-up petition to fail.

Liquidators are of crucial importance where there are risks that a company is approaching the end of its operating cycle. Liquidators protect the interests of creditors and release or transfer economic value that would otherwise be trapped and sometimes lost after a winding-up. However, in two recent cases, we have seen criticism directed at liquidators by the courts in Hong Kong. This is of particular importance where liquidators are appointed by the courts as officers of the court and must uphold high standards required by that appointment and the law.