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Navigating the crossroads between arbitration and insolvency proceedings: the Hong Kong Court of Appeal applies Guy Lam principles in a winding up case involving an arbitration clause

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?

Hong Kong, Arbitration & ADR, Insolvency & Restructuring, Herbert Smith Freehills LLP
What is the effect of Guy Lam on winding up petitions involving an arbitration clause? A third voice

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.

Hong Kong, Arbitration & ADR, Insolvency & Restructuring, Litigation, Herbert Smith Freehills LLP
Hong Kong Companies Court clarifies the applicability of Re Guy Kwok Hung Lam to cases involving an arbitration clause

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.

Hong Kong, Arbitration & ADR, Insolvency & Restructuring, Litigation, Herbert Smith Freehills LLP, Arbitration clause
Hong Kong Court of Appeal provides certainty on bar against reflective loss

On 21 April 2023, the Hong Kong Court of Appeal (CA) released its judgment Power Securities Co Ltd v Sin Kwok Lam [2023] HKCA 594, which provided certainty on the application of the bar against reflective loss for shareholders.

Background

Hong Kong, Company & Commercial, Insolvency & Restructuring, Litigation, Herbert Smith Freehills LLP, UK Supreme Court
Court of Appeal holds that anti-deprivation principle does not apply to provisions relating to the termination of an IP licence on insolvency

The anti-deprivation principle provides that “there cannot be a valid contract that a man’s property shall remain his until his bankruptcy, and, on the happening of that event, go over to someone else, and be taken away from his creditors”.

United Kingdom, Insolvency & Restructuring, Intellectual Property, Litigation, Herbert Smith Freehills LLP, Share (finance), Bankruptcy, Breach of contract, Interest, Joint venture, Court of Appeal of England & Wales
Court of Appeal reverses earlier decision and holds that anti-deprivation principle does not apply to provisions relating to the termination of an IP licence on insolvency

In September 2009 we reported on the first instance decision in Butters and ors v BBC Worldwide Ltd and ors, accessible here in which the Court held that contractual provisions in a joint venture agreement taken together with termination provisions in a licence of IP rights were void since the effect of those provisions on insolvency was to deprive creditors' access to assets and therefore contrary

United Kingdom, Insolvency & Restructuring, Intellectual Property, Litigation, Media & Entertainment, Herbert Smith Freehills LLP, Share (finance), Joint venture, Subsidiary, Court of Appeal of England & Wales
IP licences and insolvency - deprivation principle held to apply to provisions relating to the termination of an IP licence on insolvency

In Butters and ors v BBC Worldwide Ltd and ors, decided on 20 August 2009, the Court held that contractual provisions in a joint venture agreement taken together with termination provisions in a licence of IP rights were void since the effect of those provisions on insolvency was to deprive creditors access to assets and therefore contrary to public policy in the light of insolvency laws.

BUSINESS IMPACT

United Kingdom, Insolvency & Restructuring, Intellectual Property, Litigation, Herbert Smith Freehills LLP, Share (finance), Bankruptcy, Joint venture, Public limited company, Prejudice, Subsidiary