Recent missed payments by companies including by one of China's largest coal companies, Yongcheng Coal and Electricity Holding Group, based in Henan, have shaken investors' faith that state-owned enterprises (SOEs) enjoy implicit backing from the authorities, irrespective of their underlying performance. As corporates issue new bonds to pay off old debts as they fall due, thereby 'kicking the can down the road' it is feared that more defaults could follow. Yields on some bonds are reported to have risen to 34 percent, an indicator of the perceived increased risk.

The Hong Kong government is proposing much-anticipated legislation for the introduction of a corporate rescue procedure and insolvent trading regime. Hong Kong has, for years, struggled to introduce a statutory corporate rescue procedure (CRP), having previously made unsuccessful attempts in 2000-2001, 2008-2009, and 2014. Now – with COVID-19 severely impacting the economy – the government has finally tabled the Companies (Corporate Rescue) Bill.

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.

Residential aged care has recently been in the news for all the wrong reasons, with headlines due to the particularly heavy impact of COVID-19 on this sector, the interim findings of the Royal Commission into Aged Care Quality and Safety and the alarming declaration by Leading Age Services Australia that a pre-COVID-19 accounting review indicating that almost 200 nursing homes housing some 50,000 people were operating at an unacceptably high risk of insolvency – a finding supported by the recently released report by the Aged Care Financing Authority (ACFA) which found “near

In a recent judgment, the Hong Kong Court reiterated the principles outlined in Kam Leung Sui Kwan v. Kam Kwan Lai [2015] 18 HKCFAR 501 (Yung Kee), the case concerning the famous roastgoose restaurant in the heart of Hong Kong's Central district, when determining whether to exercise its discretion to wind up a foreign-incorporated company. In this case, the court also refused to grant a stay of the petition in favor of arbitration.

Florida escape

The Singapore High Court has recently granted recognition to Hong Kong liquidation proceedings and liquidators for the first time under Singapore's enactment of the United Nations Commission on International Trade Law Model Law on Cross Border Insolvency (the model law).

This decision puts to rest some of the uncertainty which arose due to the NZCA's approach in Timberworld and helps to solidify liquidators' prospects of recovering maximum preferential payments. 

Preferential payments can be an important source of funding for liquidators – and the recent decision in Bryant in the matter of Gunns Limited v Bluewood Industries Pty Ltd [2020] FCA 714 is a source of some relief for liquidators.

Timberworld – uncertainty over the impact on Australian liquidators

In several Commonwealth jurisdictions, the corporate legislation allows creditors to petition a court to order the winding up of a debtor in circumstances where that debtor is unable to pay its debts as they fall due. Such legislation generally presumes that the debtor is insolvent if it has failed to comply with a statutory notice requiring the debtor to pay a certain debt within a given period of time (a statutory demand).

The Australian Government has introduced new laws which are intended to avoid unnecessary corporate insolvencies in light of the challenges presented by the unfolding COVID-19 global pandemic. The new laws came into effect on 25 March 2020 and include:

Directors will soon be free to make decisions to trade on even insolvent entities, and incur debts in the ordinary course of business, with the passing of the Coronavirus Economic Response Package Omnibus Act 2020 last night and Royal Assent today. The Act is intended to encourage business to continue trading free of risk that insolvent trading laws – which prevent directors of insolvent companies incurring fresh debt – would impose a personal civil and criminal liability on them. There are also changes to statutory demands and debtor's petitions.