Under Hong Kong law, the courts’ jurisdiction is ordinarily territorial in nature. A plaintiff or applicant has to obtain permission (“leave”) of the court before it can validly serve a writ or other document initiating a legal action on a defendant or respondent located outside Hong Kong. For actions begun by writ, the procedures and criteria for applications for leave in this respect are set out under Order 11 of the Rules of the High Court (“RHC”).

Did you know that a liquidator of a foreign company may seek the assistance of the Hong Kong Court to obtain orders for the production of information which orders are, in substance, of the type made in Hong Kong windings-up under section 221(3) of the Companies (Winding-up and Miscellaneous Provisions) Ordinance?

As we pointed out in our Legal Update of 30 January 2014 ("New Companies Ordinance – Old Winding Up and Insolvency Regime"), the new Companies Ordinance for Hong Kong (Chapter 622) is scheduled to take effect from 3 March 2014 but it will not cover the winding-up and insolvency regime.

On January 17, 2014, Chief Judge Kevin Gross of the Bankruptcy Court for the District of Delaware issued a decision  limiting the right of a holder of a secured claim to credit bid at a bankruptcy sale. In re Fisker Auto. Holdings, Inc.,  Case No. 13-13087-KG, 2014 WL 210593 (Bankr. D. Del. Jan. 17, 2014). Fisker raises significant issues for lenders who  are interested in selling their secured debt and for parties who buy secured debt with the goal of using the debt to  acquire the borrower’s assets through a credit bid.

In the bankruptcy proceedings in respect of Mr Gabriel Ricardo Dias-Azedo (the "Bankrupt"), the Court of First Instance recently exercised its discretion under sections 37(2) and 97 of the Bankruptcy Ordinance (Cap. 6) (BO) in favour of two creditors and granted them a priority claim against the Bankrupt's estate for their costs in preserving his assets incurred before receiving notice of the bankruptcy petition.

Background

In the recent case of Lau Siu Hung v. Krzystof Marszalek (HCCW 484/2009, 17 June 2013) the Court of First Instance held that an annulment of bankruptcy does not debar a creditor, who has not proved his provable debt, from asserting his claim after the annulment.

Procedural Background

In The Joint and Several Liquidators of QQ Club Limited (in liquidation) v. Golden Year Limited (HCCW 245/2011, 9 April 2013) (QQ Club), the Court of First Instance held that a liquidator's costs in pursuing an avoidance claim are "fees and expenses properly incurred in preserving, realizing or getting in the assets", and are payable out of the company's assets in priority to all other payments prescribed in rule 179 of the Companies (Winding-up) Rules. In reaching this conclusion, the court distinguished the English Court of Appeal's decision in Lewis v.

Did you know that the court's guiding principle on assessing remuneration for liquidators in respect of their administration of trust assets held by the company is similar to the principle applicable to liquidation work, that is, on a "value for money" basis rather than as an indemnity against cost?

DID YOU KNOW...that interim fees incurred by provisional liquidators (including agents’ fees), previously thought to have been payable from the funds of an insolvent estate without formal taxation, are now required to be taxed.

The absolute priority rule of Section 1129(b) of the Bankruptcy Code is a fundamental creditor protection in a Chapter 11 bankruptcy case. In general terms, the rule provides that if a class of unsecured creditors rejects a debtor’s reorganization plan and is not paid in full, junior creditors and equity interestholders may not receive or retain any property under the plan. The rule thus implements the general state-law principle that creditors are entitled to payment before shareholders, unless creditors agree to a different result.