Hong Kong and the Mainland have agreed a new co-operation mechanism for cross-border insolvency. Under the agreement, liquidators from Hong Kong may apply to Mainland courts for recognition of insolvency proceedings in Hong Kong, whilst bankruptcy administrators from the Mainland can apply to the Hong Kong High Court for recognition of bankruptcy proceedings in the Mainland.
Hong Kong and the Mainland have agreed a new co-operation mechanism for cross-border insolvency.
On 8 February 2018, the Hong Kong Court of First Instance (the “Hong Kong Court“) ruled that the common law power to recognise and assist foreign insolvency proceedings extends to voluntary liquidations – this is the first authority on this issue in Hong Kong.
Case: IN THE MATTER of an application for recognition and assistance by the Joint Liquidators of Supreme Tycoon Limited (in liquidation in the British Virgin Islands) [2018] HKCFI 277
In a pair of significant judgments issued on the same day, Re China Huiyuan Juice Group Ltd. [2020] HKCFI 2940 and FDG Electric Vehicles Ltd. [2020] HKCFI 2931, the Honorable Mr. Justice Harris has once again issued highly relevant and timely guidance on key cross-border insolvency issues.
On Wednesday, the Court of Final Appeal ("CFA") reversed the lower courts' decision in the Yung Kee case1 , holding that the Hong Kong court has jurisdiction to order the winding up of Yung Kee Holdings Limited (the "Company"), a holding company incorporated in the British Virgin Islands and not registered in Hong Kong.
In another groundbreaking decision, the Hong Kong court in Re Ando Credit Ltd [2020] HKCFI 2775, has appointed provisional liquidators over a Hong Kong-incorporated investment manager for the express purpose of allowing the liquidators to seek recognition in the Mainland. The judgment is the latest in a series of judgments facilitating cross-border recognition and enforcement of assets and takes the degree of potential cooperation envisaged to a new level.
Application unopposed
It has long been considered that lenders under a syndicated facility retain a right to seek to recover their portion of a loan directly following a payment default, typically by seeking the winding up of obligors. This is based on the several nature of the rights of finance parties which appears in clause 2 of the standard LMA terms.
The Hong Kong government is proposing much-anticipated legislation for the introduction of a corporate rescue procedure and insolvent trading regime. Hong Kong has, for years, struggled to introduce a statutory corporate rescue procedure (CRP), having previously made unsuccessful attempts in 2000-2001, 2008-2009, and 2014. Now – with COVID-19 severely impacting the economy – the government has finally tabled the Companies (Corporate Rescue) Bill.
In 2014, the law of privilege was considered from various angles, with the year closing on a Court of Final Appeal decision emphasising the primacy of legal professional privilege ("LPP") as an absolute right guaranteed by the Basic Law of Hong Kong.
While the cases outlined below generally provide comfort that the law of privilege in Hong Kong holds strong, we offer a few practical points to help safeguard the privilege of legal advice:
In a pair of recent contrasting judgments, Re Agritrade Resources Ltd [2020] HKCFI 1967 and Re Rare Earth Magnesium Technology Group Holdings Ltd [2020] HKCFI 2260, the Hong Kong Court has once again confirmed its pragmatic approach towards applications by foreign liquidators and provisional liquidators for recognition and assistance in Hong Kong. The judgments emphasize the importance of adhering to the standard forms of order adopted by the Hong Kong courts in respect of such applications, and the need for any departure from the standard form to be fully justified.
The Court of Appeal has declined jurisdiction to wind up Yung Kee Holdings Limited (the "Company"), a company incorporated in the British Virgin Islands ("BVI"), upholding the decision of Harris J at first instance that the Company did not have "sufficient connection" with Hong Kong.