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 Swiss Cosmeceutics (Asia) Ltd [2019] HKCFI 336, Mr Justice Harris of the Hong Kong Court of First Instance declined to wind up a company despite it failing to establish a bona fide defence on substantial grounds. Mr Justice Harris commented on the difficulties presented by sporadic record keeping, and reiterated the principle that the burden of proof lies with the company to demonstrate a bona fide defence on substantial grounds, despite the existence of anomalies in the petitioner’s claim.

Facts

In a highly international cross-border restructuring, the High Court of Hong Kong has refused to assist the New York-based Chapter 11 trustee of a Singaporean subsidiary of the Cayman-incorporated Peruvian business China Fishery Group (“CFG”).

On 20 June 2018, the Indian Government released a suggested draft chapter on cross-border insolvency to be included into the Insolvency & Bankruptcy Code, 2016 (Code). This addresses a missing link in the ambitious reforms of the Indian insolvency framework and is to be welcomed.

It is timely, with further reform of the new Indian Bankruptcy Code (IBC) in prospect, to outline our thoughts on some of the current issues on which various market participants have requested an understanding of the approach and learnings of overseas practitioners.

Introduction

The Insolvency and Bankruptcy Code, 2016 (Code) has just been passed by both Houses of the Indian Parliament. The key objectives of the Indian government in driving this legislation forward were to improve India‘s poor ranking on the ease of doing business index created by the World Bank Group and to stimulate the growth of the Indian capital markets, and the stated intention of the Code is to replace the relevant insolvency, restructuring and winding up provisions which are spread over a number of Indian statutes.

Our role

FSA announced on 31 October that MF Global UK Limited had entered into special administration. It noted this is the first time the special administration regime has been initiated since it took effect in February 2011, and summarised the benefits of the regime. In particular, it highlighted that the regime should facilitate swift return of client assets and timely engagement with market infrastructure. (Source:FSA Announces MF Global Administration)

Summary

FSA is consulting on the need for certain financial services firms to prepare and maintain Recovery and Resolution Plans (RRPs) and in addition for some of these firms, and others, to make further preparations for their investment client money and custody assets (CMA) holdings.

Why now?

The Commission is consulting on the application of the current Community guidelines on State aid for rescuing and restructuring firms in difficulty. It has provided Member States and other interested parties with a questionnaire, on which it asks for responses by 2 February 2011.

Treasury makes banking insolvency rules: Treasury has made insolvency and administration rules covering building societies in England and Scotland and amended the English rules on banks in insolvency and administration and the Scottish rules on banking insolvencies. The English rules, among other changes, provide for the statement of proposals to be sent to FSA and FSCS and for the disapplication of set-off for protected deposits up to FSCS's statutory limit. The Scottish instruments apply to insolvencies of banks and building societies under the Banking Act 2009.