The COVID - 19 pandemic has had a tremendous and unprecedented impact on the global economy.To mitigate this, many governments have introduced temporary relief measures to help local businesses.

In Hung Yip (HK) Engineering Company Limited v. Kinli Civil Engineering Limited [2021] HKCFI 153, the Honourable Mr Justice Harris reiterated the test governing when the court will restrain the presentation of a winding-up petition. This is a timely reminder amidst the COVID-19 crisis, which has sparked disputes between companies and their creditors.

In Re Ando Credit Limited [2020] HKCFI 2775, the Honourable Mr Justice Harris appointed provisional liquidators over a Hong Kong- incorporated company, in an application  that broke ground as the first of its kind, made  with  the express purpose of  seeking  recognition  in  the Mainland.

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.

Often in winding-up petitions, contributories of the company, for one reason or another, may wish to oppose the winding-up petition in their own right, including by filing evidence and making submissions at hearings. One major concern a contributory may have in deciding whether to take this course of action is of course the potential costs consequences, especially in the scenario where the opposition is ultimately unsuccessful and the company is wound up.

At present, Hong Kong does not have any statutory corporate rescue regime. A financially distressed company may try to rescue its business by entering into (i) private debt restructuring agreement(s) with its major creditors; or (ii) a scheme of arrangement under the Companies Ordinance (Cap. 622), which allows for a compromise between the company and its shareholders and creditors.

Two recent decisions of the Honourable Mr Justice Harris are helpful additions to the growing amount of case law in this jurisdiction dealing with cross-border insolvency issues and are worthy of examination.

Hong Kong Companies Court appoints provisional liquidators for the purpose of seeking recognition in Mainland for the first time

A bankrupt’s solicitors can be required to handover to the trustees in bankruptcy the bankrupt contact information, full details of last known whereabouts, and client trust account ledger records, pursuant to section 29 of the Bankruptcy Ordinance.

Directors of Hong Kong companies operate in an environment of personal liability – a liability that is brought into sharp focus where companies face financial difficulties or even insolvency. This liability may take not only the form of criminal or civil liability but also the form of a director disqualification order, meaning an order to bar that director from being involved in the management of a company in the future.

对董事们而言，公司清盘可能是其以往不法行为报应不爽的审判日。如果无力偿债山雨欲来，有一些事项董事们应牢记在心，以免在无力偿债境况已不可避免时承担个人责任。

不公平优先权

有关不公平优先权的规定，可参见《公司（清盘及杂项条文）条例》第 266、266A 和 266B 条（第32章）(简称“条例)。下列情况均构成公司对某人给予不公平优先权：

1. 此人为公司的债权人，或者是公司债务或负债的保证人或担保人；
2. 因为诉讼，此人所处境地优于假如公司进行清算的情况；以及
3. 公司有意让此人处于更优处境。请注意，如果对公司的合伙人给予不公平优先权，则对此意愿的推定将可以辩驳。

如果 (1) 在清盘即将启动之前的两年内对公司合伙人（如董事、影子董事或公司的其他高管），或是 (2) 在清盘启动之日前的六个月内对与公司无关联者给予不公平优先权，则构成不公平优先权的交易将作废，并可被法院命令搁置，从而将公司恢复到给予该不公平优先权之前的状态。