If a debt arises from a contract that contains an exclusive jurisdiction clause (EJC) in favour of a foreign court, how will the Hong Kong court deal with a bankruptcy petition based on that debt? A highly anticipated judgment from Hong Kong’s highest court suggests that the bankruptcy petition will likely be dismissed, and that the foreign EJC will be given effect. But, as we will discuss below, the Court seems to leave other possibilities open, depending on the facts in a particular case.
The Grand Court of the Cayman Islands has issued its first judgment appointing Restructuring Officers under the new section 91B of the Cayman Islands Companies Act, which came into force on 31 August 2022.
Introduction
A recent Hong Kong Court of Appeal decision examined a creditor’s right to commence bankruptcy/insolvency proceedings where the petition debt arises from an agreement containing an exclusive jurisdiction clause in favour of a foreign court: Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP [2022] HKCA 1297.
A recent decision of the Cayman Islands Grand Court is an important reminder that a liquidator's costs claimed from trust assets must be proportionate and reasonable, and will be refused on certain grounds.
Background
Historically, the Hong Kong courts have generally recognised foreign insolvency proceedings commenced in the jurisdiction in which the company is incorporated. This may no longer be the case in Hong Kong following the recent decision of Provisional Liquidator of Global Brands Group Holding Ltd v Computershare Hong Kong Trustees Ltd [2022] HKCFI 1789 (Global Brands).
The Cayman Islands Government has published a Commencement Order confirming that the Companies (Amendment) Act, 2021 will come into force on 31 August 2022.
The Amendment Act introduces a new corporate restructuring process and the concept of a dedicated restructuring officer into the Cayman Islands Companies Act (2022 Revision).
Under the Amendment Act, the filing of a petition for the appointment of a restructuring officer will trigger an automatic global moratorium on claims against the company, giving it the opportunity to seek to implement a restructuring.
Historically, the common law has only recognised foreign insolvency proceedings commenced in the jurisdiction in which the company is incorporated. This may no longer be the case in Hong Kong. Going forward, a Hong Kong court will now recognise foreign insolvency proceedings in the jurisdiction of the company’s “centre of main interests” (COMI). Indeed, it will not be sufficient, nor will it be necessary, that the foreign insolvency process is conducted in a company’s place of incorporation.
On 6 June 2022, Mr Justice Harris sanctioned a Hong Kong scheme of arrangement for Rare Earth Magnesium Technology Group (the Company) in re Rare Earth Magnesium Technology Limited [2022] HKFCI 1686 (Rare Earth).
We previously wrote about the Court’s attitude to liquidators’ applications for directions on matters arising in a compulsory winding up (i.e., by the court) under section 200 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap.
A Cayman segregated portfolio company, Performance Insurance Company SPC, was placed into official liquidation. The joint liquidators' appointment extended to all of the underlying segregated portfolios (SPs), some of which were solvent and others insolvent. Two of the solvent SPs applied to the Grand Court of the Cayman Islands seeking the appointment of an additional liquidator of the company to separately represent the interests of those solvent SPs on the basis that the original liquidators were conflicted in administering both the solvent and insolvent SPs.