The natural and most appropriate jurisdiction in which to wind up a company is its place of incorporation. The Hong Kong Companies Court, however, routinely deals with winding up petitions against companies which are incorporated outside Hong Kong, but listed on the Hong Kong Stock Exchange (“HKEx”). Given recent economic difficulties, the number of such petitions has been on the rise.
When the Hong Kong Court recognises offshore soft-touch provisional liquidation, will there be an automatic stay of proceedings in Hong Kong?
Recently, in Re FDG Electric Vehicles Limited [2020] HKCFI 2931, the Companies Court answered “no”. In doing so, the Court revisited the wording of the standard-form recognition order.
Soft-touch provisional liquidations
We are pleased to announce the publication of the third edition of the Herbert Smith Freehills Guide to Restructuring, Turnaround and Insolvency, Asia Pacific.
Against a backdrop of the COVID-19 pandemic and the resulting economic downturn, we are seeing companies and lenders respond to a new and challenging business environment. The challenges associated with this new environment are further exacerbated as the influencing factors change in nature and intensity.
Statutory demand is a common and important tool in the winding up process. But recently, the Hong Kong Court of First Instance has reminded us that it is by no means a must.
1. Introduction
The long-running saga between Shandong Chenming Paper Holdings (“Shandong Chenming“) and Arjowiggins HKK2 Ltd (“Arjowiggins“) has continued with the Court of Appeal handing down its judgment on an appeal against a lower court judgment which had dismissed Shandong Chenming’s application to injunct Arjowiggins from presenting a winding-up petition against Shandong Chenming (Shandong Chenming Paper Holdings Limited v. Arjowiggins HKK2 Limited [2020] HKCA 670).
Analyzing the inner workings of the elements required for the securities contract “safe harbor” protection under Section 546(e) of the Bankruptcy Code, the Bankruptcy Court for the SDNY dismissed a complaint seeking to recover approximately US$1 billion in allegedly fraudulent transfers brought against various transferees as part of the Boston Generating Chapter 11 case.
The recent decision in Re The Liquidator of Shenzhen Everich Supply Chain Co, Ltd (in liquidation in the People’s Republic of China) [2020] HKCFI 965 reaffirms the willingness of the Hong Kong Companies Court (the “Companies Court”) to recognise the winding-up of a company in Mainland China and thereby grant recognition and assistance to liquidators appointed in the Mainland.
It is well established that by filing a proof of claim in bankruptcy, a creditor submits itself to the equitable jurisdiction of the bankruptcy court and waives any right it would otherwise have to a jury trial with respect to any issue that “bears directly on the allowance of its claim.” Such a waiver normally applies in fraudulent transfer actions, since under Section 502(d) of the Bankruptcy Code the court must disallow a claim of any entity that received an avoidable transfer.