In the case of Re Guangdong Overseas Construction Corporation [2023] HKCFI 1340, the Honourable Madam Justice Linda Chan recognized and provided assistance to a mainland China appointed administrator over a mainland China company in liquidation despite the administrator's application being outside the scope of the insolvency cooperation mechanism between Hong Kong and mainland China courts. The Hong Kong court affirmed that its jurisdiction to recognize and assist office-holders appointed by a court of another jurisdiction derives from common law.
The latest insolvency figures for May show insolvencies continuing to increase, with construction and retail being among the hardest-hit sectors. Company voluntary liquidations continue to top the table, accounting for 85% of the total 2,552 insolvencies for the last month. Compulsory liquidations are also on the rise, particularly driven by HMRC. Small and micro businesses (with annual sales of less than £1m) account for around 99% of all liquidations, according to PWC.
A Hong Kong court has reminded debtors of the need to present a credible and realistic restructuring proposal when facing creditors threatening winding up actions. In Re Jiayuan International Group Limited (佳源國際控股有限公司) [2023] HKCFI 1254, the Honourable Madam Justice Linda Chan warned that it is not enough for a debtor company to merely point to commercial discussions with some of the creditors when seeking an adjournment.
In the recent case of Avanti Communications Limited (in administration) [2023] EWHC 940 (Ch), the High Court revisited the perpetually knotty question: what level of control is necessary for a charge over assets to take effect as a fixed, rather than floating, charge?
The Hong Kong Court of Final Appeal (CFA) has confirmed a Court of Appeal finding that the court should respect the effect of an exclusive jurisdiction clause in bankruptcy proceedings, just as it does in ordinary civil actions.
In Re Unity Group Holdings International Ltd [2022] HKCFI 3419, the Hong Kong court has for the first time sanctioned a scheme of arrangement that releases debts of third-party obligors that were guaranteed by the scheme company without requiring a deed of contribution. The Honourable Mr. Justice Harris deviated from the English law approach and ruled that a deed of contribution will no longer be necessary for the release of a principal obligor's liability that has been guaranteed by the scheme company.
A going concern
With rising insolvency rates, driven in particular by the number of creditors’ voluntary liquidations reaching record highs, the decision in the recent Court of Appeal case of PSV 1982 Limited v Langdon [2022] EWCA Civ 1319 serves as a timely reminder for directors of the personal risks involved in re-using the name of a liquidated company.
The Hong Kong Court of Appeal has confirmed that the court should respect the effect of an exclusive jurisdiction clause in bankruptcy proceedings, just as it does in ordinary civil actions. To do otherwise, it said, it would be illogical.
With administration figures creeping back up after falling to low levels during the pandemic, the number of pre-pack sales of businesses in administration also appears to be on the increase. In such transactions, a purchaser acquires all, or substantially all, of the business and assets of the insolvent company from the administrator, with the terms of the deal being agreed pre-appointment and completion usually taking place immediately after the administrator takes office.