In two recent judgments, the Hong Kong companies court has set out the principles applicable to winding up companies holding operating subsidiaries in the mainland through intermediate subsidiaries incorporated offshore, most commonly in the BVI. In doing so, the Honourable Mr. Justice Harris highlighted the need for the petitioner to demonstrate a "real and discernible benefit" to creditors, something which will be challenging to prove if the company’s centre of main interests is not in Hong Kong.

随着香港及内地就相互认可和协助破产程序及重组事务达成共识，一个新纪元到来了。从今往后，希望通过中国债务人位于香港的财产收回欠款的债权人，或是拥有内地财产的香港运营实体的债权人，终于在谈判桌前享有了话语权。

随着香港及内地就相互认可和协助破产程序及重组事务达成共识，一个新纪元到来了。从今往后，希望通过中国债务人位于香港的财产收回欠款的债权人，或是拥有内地财产的香港运营实体的债权人，终于在谈判桌前享有了话语权。

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In connection with recognition, PT Bakrie’s foreign representative sought an order from the Bankruptcy Court enforcing its Indonesian PKPU Plan. The foreign representative argued that the plan provided a discharge of the debtor, and all other parties, from any liability in respect of the intercompany loans at issue. By seeking enforcement of the PKPU Plan, the foreign representative effectively sought a release of non-debtor third parties from liability to the Objecting Noteholders and others, including in respect of the approximate $161 million stipulated judgment.

In the recent opinion In re PT Bakrie Telecom TBK, 2021 WL 1439953, the Bankruptcy Court for the Southern District of New York provided some further guidance on what constitutes a “collective proceeding” for purposes of achieving recognition of a foreign proceeding under Chapter 15 of the Bankruptcy Code. This post will address the collective nature of the proceeding at issue. In a future post we will address other important elements of Judge Lane’s decision.

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.

In HighPoint Resources Corporation, Case No. 21-10565-CSS (Bankr. D. Del. 2021), the U.S. Trustee’s office filed an objection (Dkt. No. 48) to the rapid confirmation of the Debtors’ plan of reorganization, among other things, indicating its concern regarding the recent trend of expedited pre-packaged plans because of their failure to provide interested parties with adequate notice.

Expedited Pre-Packs

Early evening on February 23, 2021, Belk Inc. and its affiliates (collectively, “Belk”) filed their Chapter 11 bankruptcy petitions in the Bankruptcy Court for the Southern District of Texas. Less than seventeen hours later, Judge Marvin Isgur confirmed Belk’s pre-packed plan of reorganization. Belk is not the first Chapter 11 bankruptcy case to accomplish plan confirmation within the first twenty-four hours after filing a petition, and it certainly won’t be the last. In 2019, Sungard Availability Services Capital, Inc.

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.

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

Recent missed payments by companies including by one of China's largest coal companies, Yongcheng Coal and Electricity Holding Group, based in Henan, have shaken investors' faith that state-owned enterprises (SOEs) enjoy implicit backing from the authorities, irrespective of their underlying performance. As corporates issue new bonds to pay off old debts as they fall due, thereby 'kicking the can down the road' it is feared that more defaults could follow. Yields on some bonds are reported to have risen to 34 percent, an indicator of the perceived increased risk.