We recently blogged (here) about the Privy Council decision of Sian Participation Corporation (In Liquidation) v Halimeda InternationalLtd [2024] UKPC 16 (

Can a creditor obtain a winding up order against a debtor company if the underlying dispute over the debt is subject to an arbitration agreement between the parties?

The Hong Kong Court of Appeal has finally laid to rest the vexed issue of whether an arbitration agreement or a winding-up petition should take precedence in an insolvency situation. In two parallel decisions, the Court of Appeal ruled that an arbitration agreement should be treated in the same way as an exclusive jurisdiction clause and that the principle should be given a wide interpretation.

According to a recent report, nearly 6,000 construction companies in the UK are in danger of going out of business. In Hong Kong, a major contractor has lost its licence and was removed from the government's registered list of contractors on 16 November 2023, with the company being given only a month to settle five private residential and commercial projects. When construction companies become insolvent, a host of tricky legal and practical issues come into play.

A bleak picture

Where a winding up petition is based on a debt arising from a contract with a non-Hong Kong exclusive jurisdiction clause, the court will tend to dismiss or stay the winding up petition in favour of the parties’ agreed forum unless there are strong countervailing factors.

In the current economic climate, more and more companies are getting into financial difficulties, informal workouts by debtor companies, with support from certain creditors, seem to be increasingly common.

When a company is in the so-called “twilight zone” approaching insolvency, it is well-established that the directors’ fiduciary duties require them to take into account interest of creditors (the so-called “creditor duty”).

Three recent Hong Kong first instance court decisions have left undecided the question of whether a winding-up petition will trump an agreement to arbitrate when it comes to a winding-up and particularly in the context of cross-claims. A Court of Final Appeal decision this spring had seemed to provide pointers that the parties' agreement would be upheld but the issue – particularly when it comes to unmeritorious and late arbitration applications – is dividing the courts.

Two recent cases, Re Guangdong Overseas Construction Corporation [2023] HKCFI 1340 (the “GOCC Case“) and Re Trinity International Brands Limited [2023] HKCFI 1581 (the “Trinity Case“), reaffirm

In Simplicity & Vogue Retailing (HK) Co., Limited [2023] HKCFI 1443, the Hong Kong Companies Court (the “Court“) made a winding up order against the Company on the basis that it failed to pay security in time. In considering the Company’s opposition grounds, the Court commented that it retains discretion to wind up a company in cases involving an arbitration clause.