Introduction
Hong Kong courts recently recognised reorganisation proceedings in Mainland China for the first time in Re HNA Group Co Limited [2021] HKCFI 2897, further enhancing the cooperation between Mainland China and Hong Kong in cross-border insolvency matters.
The facts
In a significant decision, the Shenzhen Intermediate People's Court (Shenzhen court) has ordered formal recognition in the mainland for Hong Kong appointed liquidators. This is the first occasion on which a mainland court has formally recognized and granted assistance to Hong Kong liquidators, expressly granting them powers to deal with assets located in the mainland under the new insolvency co-operation mechanism concluded between Hong Kong and the mainland.
In Re Grand Peace Group Holdings Limited [2021] HKCFI 2361, the Hong Kong Court refused to exercise its discretionary jurisdiction to wind up an offshore holding company due to difficulties in the recognition of Hong Kong liquidators in the BVI.
Background
Summary
If a person presents a petition for their own bankruptcy (“self-petition”), are there any safeguards to ensure that the self-petition is genuine, as opposed to a cynical device by the person to buy themselves time to pay, or to give themselves some negotiating position with their creditors?
This interesting question was considered in a recent Hong Kong judgment.
A liquidator is usually involved at the end of a company’s life cycle. The role of a liquidator includes investigating the reasons why a company has failed; collecting, protecting and realising the company’s assets; and distributing the proceeds of realisation in accordance with the statutory rules of distribution. The liquidator regime in Hong Kong thus places an emphasis on ensuring that the winding-up of financially distressed businesses is conducted in a fair and orderly manner and under the control and oversight of professionals conversant with the winding-up process and rules.
In Nuoxi Capital Ltd v Peking University Founder Group Co Ltd [2021] HKCFI 3817, Mr Justice Harris held that keepwell disputes should be determined in Hong Kong in accordance with the contractual exclusive jurisdiction clause, notwithstanding the Court recognising the keepwell provider’s Mainland insolvency proceedings.
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Under Hong Kong law, the terms “insolvency”, “liquidation” or “winding-up” are used with reference to companies, and “bankruptcy” is used in relation to individuals. The former are primarily regulated by Companies (Winding Up and Miscellaneous Provisions Ordinance) (CWUO) (Cap. 32), and the latter by the Bankruptcy Ordinance (Cap 6). The article below focuses on the corporate insolvency regime, in relation to financially distressed companies which are unable to pay their debts or discharge their payment obligations.