Zenrock Commodities Trading Pte Ltd is one of the latest additions to the increasing list of commodities traders in Singapore making recent headlines, with financial difficulties and malpractice allegations coming to light. The COVID-19 crisis, oil price volatility and slumping demand are acting as a catalyst, and are affecting a majority of oil majors and traders in Singapore and the region.
In the light of increased volatility across many markets and disruptions to economic activity, parties to transactions that are subject to ISDA Master Agreements1 will need to think about what strategies they would adopt if an Event of Default occurs with respect to their counterparties.
Choices
This note sets out the circumstances in which a creditor may successfully lift a statutory moratorium against a company in administration in England and Wales, and in Singapore.
English law
During the COVID-19 crisis, many companies are facing unexpected financial distress, and taking steps to stabilise their business and bolster their finances.
Many directors will not have experienced these issues before, and should be aware of how their duties are impacted when the company is in financial distress.
This guide has been prepared on the basis of Hong Kong law principles. Many of the principles will also be applicable to other common law jurisdictions.
How are companies responding to the current crisis?
In Joint Provisional Liquidators of Moody Technology Holdings Ltd [2020] HKCFI 416, the Hong Kong Court of First Instance (the “Hong KongCourt”) granted a recognition order to foreign provisional liquidators who were appointed on a soft-touch basis, to explore and facilitate the restructuring of a company. The order was made despite soft-touch provisional liquidation being per se impermissible in Hong Kong.
Background
The principle in ex parte James, under which the Court will not permit its officers (such as a liquidator) to act in a way which, although lawful, does not accord with the standards of right-thinking people, has recently been clarified by the English Court of Appeal in Lehman Brothers Australia Limited (in liquidation) v Edward John Macnamara & others (the joint administrators of Lehman Brothers International (Europe) (in administration)) [2020] EWCA Civ 321
In a long-awaited development of cross-border insolvency cooperation between Hong Kong and Mainland China, the Hong Kong Court has granted recognition and assistance to Mainland liquidators for the first time in Joint and Several Liquidators of CEFC Shanghai International Group Ltd [2020] HKCFI 167.
Background
The Court of First Instance has recently helpfully summarised the legal position on schemes of arrangement under both Hong Kong law and English law. Notably, it has called for further development in cross-border coordination in order to avoid the trouble of parallel insolvency proceedings and it has raised a red flag in relation to detailed disclosure of restructuring costs: Da Yu Financial Holdings Limited [2019] HKCFI 2531.
In But Ka Chon v Interactive Brokers LLC [2019] HKCA 873, the Hong Kong Court of Appeal dismissed an appeal to set aside a statutory demand arising out of online forex futures trading debts.
In Re Kaoru Takamatsu [2019] HKCFI 802, [2019] HKEC 906, the Hong Kong Court of First Instance has recognised Japanese insolvency proceedings and granted assistance to a trustee in bankruptcy appointed by the Japanese Court.