Through a trio of decisions, Mr Justice Harris has opened a new and commendable era for Hong Kong’s cross-border insolvency regime. The position under this new era is in brief thus:

First, the Hong Kong court is likely to use the debtor’s centre of main interests (“COMI”) as a yardstick to determine eligibility for recognition and assistance.

Correcting a widespread mistake, Mr Justice Harris in Re China Ocean Industry Group Ltd [2021] HKCFI 247 held that the Court has no jurisdiction to make a validation order after a winding-up petition in respect of the issue of new shares and convertible bonds (“CBs”).

The correct position is that a company subject to a winding-up petition may issue new shares and CBs without a validation order.

Background to the widespread mistake and the present case

In the landmark case of Re China Huiyuan Juice Group Limited [2020] HKCFI 2940, Mr Justice Harris recalibrated the Hong Kong winding-up jurisdiction and its application to an offshore incorporated, Hong Kong-listed entity.

In particular, the decision explains why the Hong Kong court may be unable to wind up an offshore incorporated, Hong Kong-listed company where all of the company’s operating assets are in the Mainland.

The material facts

Recent weeks have witnessed seismic shifts in the oil and gas industry because of crashing oil prices, demand destruction associated with the COVID-19 pandemic, and crude oil storage reaching record capacity levels. Upstream producers are especially vulnerable to these market pressures and have begun shutting in wells, asserting force majeure, and cutting costs. As counterparties to distressed producers, midstream players face new challenges in navigating contractual relationships and mitigating risk.