Companies planning to resist a winding up petition and seek an adjournment on the ground of progressing a restructuring plan are reminded to produce timely and sufficient evidence in support of their application for an adjournment, in particular evidence of creditors’ support, provides the Hong Kong Companies Court (Court) in Re Founder Information (Hong Kong) Limited [2021] HKCFI 311.
We have blogged previously about section 546(e), the Bankruptcy Code’s safe harbor for certain transfers otherwise subject to avoidance as preferences or fraudulent transfers. See 11 U.S.C. § 546(e). Among the transfers protected by the section 546(e) safe harbor are transfers by or to a “financial participant” made “in connection with a securities contract.” Id.
After abortive attempts in 2000-2001, 2008-2009, and 2014 to introduce a statutory corporate rescue procedure, the Hong Kong Government has recently announced in a paper submitted to the Legislative Council that it will present the Companies (Corporate Rescue) Bill (the “Bill”) to the Legislative Council in early 2021. Once enacted, the Bill will introduce a corporate rescue procedure and insolvent trading provisions in Hong Kong.
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
The Bankruptcy Code enables a trustee to set aside certain transfers made by debtors before bankruptcy. See 11 U.S.C. §§ 544, 547, 548. These avoidance powers are subject to certain limitations, including a safe harbor in section 546(e) exempting certain transfers. Among other things, section 546(e) bars avoidance of a “settlement payment . . . made by or to (or for the benefit of) . . . a financial institution [or] a transfer made by or to (or for the benefit of) a . . . financial institution . . .
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.
Last February, we blogged about the Third Circuit’s decision in In re Energy Future Holdings Corp, No. 19-1430, 2020 U.S. App. LEXIS 4947 (Feb. 18, 2020). The Third Circuit approved a process for resolving asbestos claims in which a bar date was imposed on filing the claims, but late claimants who were unaware of their asbestos claims would be allowed to have the bar date excused through Bankruptcy Rule 3003(c)(3). (A bar date is a date set by the court by which all claims against the debtor must be filed.