Summary

In the recent case of Re Unity Group Holdings International Limited [2022] HKCFI 3419, the Hong Kong Court of First Instance sanctioned a scheme of arrangement between Unity Group Holdings International Limited and its creditors. This case confirms that the guarantor’s scheme can discharge debts owed by principal obligors who are members of the same group.

In the recent case of Re Joint and Several Liquidators of Ozner Water International Holding Ltd 浩澤淨水國際控股有限公司 (In Liquidation) [2022] HKCU 940, the Hong Kong Court of First Instance (Hong Kong Court) granted an application by the liquidators (Liquidators) of Ozner Water International Holding Ltd. (Company) for a letter of request for recognition and assistance (Letter of Request) to be issued to the Shenzhen Intermediate People’s Court (Shenzhen Court).

In the landmark decision in case (2021)粤03认港破1号(2021) Yue 03 Ren Gang Po No. 1 (Shenzhen Court Decision), the Shenzhen Intermediate People’s Court (Shenzhen Court) ordered formal recognition in Mainland China of liquidators appointed by the Hong Kong Court of First Instance (Hong Kong Court) over Samson Paper Company Limited (Company) to permit the liquidators to exercise powers over the Company’s assets located in Mainland China.

1. State of the Restructuring Market

1.1 Market Trends and Changes

State of the Restructuring and Insolvency Market

There were 27,359 insolvencies in France as of the end of September 2021, down 25.1% from the same period in 2020, and down 47.9% from September 2019. Such reduction is relatively stable across all sectors, including those most severely affected by the health-related restrictions, such as accommodation and food services (down 44.2% year-on-year) and trade (down 28.1% year on year).

Fewer Insolvencies for More Opportunities

At the end of 2021, corporate bankruptcies (for most company sizes and in most sectors) were at their lowest level compared to the pre-COVID-19 figures from 2019, with a 50% drop in insolvency proceedings and a 10% decrease in pre-insolvency situations. This was largely due to the temporary impact of government emergency measures and support, including:

The U.S. Court of Appeals for the Sixth Circuit recently ruled in a case involving a Chapter 13 debtors’ attempt to shield contributions to a 401(k) retirement account from “projected disposable income,” therefore making such amounts inaccessible to the debtors’ creditors.^[1] For the reasons explained below, the Sixth Circuit rejected the debtors’ arguments.

Case Background

A statute must be interpreted and enforced as written, regardless, according to the U.S. Court of Appeals for the Sixth Circuit, “of whether a court likes the results of that application in a particular case.” That legal maxim guided the Sixth Circuit’s reasoning in a recent decision^[1] in a case involving a Chapter 13 debtor’s repeated filings and requests for dismissal of his bankruptcy cases in order to avoid foreclosure of his home.

On January 14, 2021, the U.S. Supreme Court decided City of Chicago, Illinois v. Fulton (Case No. 19-357, Jan. 14, 2021), a case which examined whether merely retaining estate property after a bankruptcy filing violates the automatic stay provided for by §362(a) of the Bankruptcy Code. The Court overruled the bankruptcy court and U.S. Court of Appeals for the Seventh Circuit in deciding that mere retention of property does not violate the automatic stay.

Case Background

When an individual files a Chapter 7 bankruptcy case, the debtor’s non-exempt assets become property of the estate that is used to pay creditors. “Property of the estate” is a defined term under the Bankruptcy Code, so a disputed question in many cases is: What assets are, in fact, available to creditors?

Once a Chapter 7 debtor receives a discharge of personal debts, creditors are enjoined from taking action to collect, recover, or offset such debts. However, unlike personal debts, liens held by secured creditors “ride through” bankruptcy. The underlying debt secured by the lien may be extinguished, but as long as the lien is valid it survives the bankruptcy.