The Hong Kong Court of Appeal has finally laid to rest the vexed issue of whether an arbitration agreement or a winding-up petition should take precedence in an insolvency situation. In two parallel decisions, the Court of Appeal ruled that an arbitration agreement should be treated in the same way as an exclusive jurisdiction clause and that the principle should be given a wide interpretation.
According to a recent report, nearly 6,000 construction companies in the UK are in danger of going out of business. In Hong Kong, a major contractor has lost its licence and was removed from the government's registered list of contractors on 16 November 2023, with the company being given only a month to settle five private residential and commercial projects. When construction companies become insolvent, a host of tricky legal and practical issues come into play.
A bleak picture
Three recent Hong Kong first instance court decisions have left undecided the question of whether a winding-up petition will trump an agreement to arbitrate when it comes to a winding-up and particularly in the context of cross-claims. A Court of Final Appeal decision this spring had seemed to provide pointers that the parties' agreement would be upheld but the issue – particularly when it comes to unmeritorious and late arbitration applications – is dividing the courts.
For the first time in England & Wales, a court has ordered the winding-up of a listed plc on the grounds of loss of substratum – the abandonment of the company's original main object and purpose. If Hong Kong follows this decision, it would be very welcome to minority shareholders who would have an additional option to retrieve their investment monies from companies that embark on a completely different path to that for which they initially signed up.
The Bankruptcy Court for the Northern District of Texas dismissed the National Rifle Association’s (“NRA”) bankruptcy case on May 11, finding that the case was not filed in good faith. In his opinion, Judge Harlin Hale found that there was cause for dismissal because the case was filed “to gain unfair litigation advantage and … to avoid a state regulatory scheme,” neither of which he considered to be a purpose intended or sanctioned by the Bankruptcy Code.
In a January 2021 decision issued in the re-opened United Refining Company1 bankruptcy case, Judge Lopez of the Southern District of Texas Bankruptcy Court addressed when a tort claim is deemed to arise for purposes
The National Rifle Association (“NRA”), along with its wholly owned Texas subsidiary, filed for chapter 11 bankruptcy protection on January 15, 2021 in the Bankruptcy Court for the Northern District of Texas. The case already has presented several threshold issues and challenges that are of interest to both bankruptcy practitioners and the market as a whole.
Background
In a pair of recent contrasting judgments, Re Agritrade Resources Ltd [2020] HKCFI 1967 and Re Rare Earth Magnesium Technology Group Holdings Ltd [2020] HKCFI 2260, the Hong Kong Court has once again confirmed its pragmatic approach towards applications by foreign liquidators and provisional liquidators for recognition and assistance in Hong Kong. The judgments emphasize the importance of adhering to the standard forms of order adopted by the Hong Kong courts in respect of such applications, and the need for any departure from the standard form to be fully justified.
In Shameeka Ien v. TransCare Corp., et al. (In re TransCareCorp.), Case No. 16-10407, Adv. P. No. 16-01033 (Bankr. S.D.N.Y. May 7, 2020) [D.I. 157], the Bankruptcy Court for the Southern District of New York recently refused to dismiss WARN Act claims against Patriarch Partners, LLC, private equity firm (“PE Firm“), and its owner, Lynn Tilton (“PE Owner“), resulting from the staggered chapter 7 bankruptcies of several portfolio companies, TransCare Corporation and its affiliates (collectively, the “Debtors“).
Joining three other bankruptcy courts, Judge Thuma of the District of New Mexico recently held that the rules issued by the Small Business Administration (“SBA“) that restrict bankrupt entities from participating in the Paycheck Protection Program (“PPP“) violated the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, P.L. 115-136 (the “CARES Act”), as well as section 525(a) of the Bankruptcy Code.