Background

Bonds that are traded via clearing houses, such as Euroclear and Clearstream, often contain terms providing that there will be a trustee for the issue, who may be appointed by the participants in the relevant clearing system or by the beneficial owners.

Quite often, the terms of the bonds will contain so-called “no-action clauses”, pursuant to which the trustee may be accorded certain rights and powers to take action on behalf, and instead, of the beneficial bondholders.

In recent years, it has become increasingly common for companies seeking to avoid an immediate winding-up order, particularly listed companies, to pray in aid of alleged efforts to restructure their debts in a bid to obtain adjournments of a winding-up petition. All too often, these valiant attempts fail: see Re Chase On Development Limited [2020] HKCFI 629, Re SMI Holdings Group Limited [2020] HKCFI 824 and Re REXLot Holdings Ltd [2020] HKCFI 2212 to name a few.

In the landmark case of Re China Huiyuan Juice Group Limited [2020] HKCFI 2940, Mr Justice Harris recalibrated the Hong Kong winding-up jurisdiction and its application to an offshore incorporated, Hong Kong-listed entity.

In particular, the decision explains why the Hong Kong court may be unable to wind-up an offshore incorporated, Hong Kong-listed company where all of the company’s operating assets are in the Mainland.

The Material Facts

In the recent decision of Polyline Development Ltd v Ching Lin Chun and Others [2021] HKCFI 483, Mr Recorder Manzoni SC struck out the Plaintiff’s statement of claim and action on a number of grounds. At para. 9 of the judgment, the learned Recorder highlighted the length of the submissions and evidence put forward by the parties, before remarking that “it may be thought that if such voluminous material is necessary in order to persuade the court that the claim is obviously unsustainable, the application is somewhat ambitious”

Hot on the heels of a trio of decisions concerning offshore provisional liquidation, which opened a new and commendable era for Hong Kong’s cross-border insolvency regime (see https://dvc.hk/en/news/cases-detail/heralding-a-new-and-healthy-era-of-cross-border-insolvency-recognition-in-hong-kong-re-fdg-electric-vehicles-ltd-re-

The recent decision of Justice B.E.

In times of crisis such as the ongoing COVID-19 pandemic, businesses are required to make important decisions with very significant implications at an accelerated pace and in the face of the unknown. This was the case when governments across the globe ordered borders to shut and non-essential activities to scale down or stop almost a year ago. This remains true as governments have announced and begun implementing plans to restart the economy and financial pressures are mounting rapidly on businesses to resume operations while facing an uncertain economy.

Through a trio of decisions, Mr Justice Harris has opened a new and commendable era for Hong Kong’s cross-border insolvency regime. The position under this new era is in brief thus:

First, the Hong Kong court is likely to use the debtor’s centre of main interests (“COMI”) as a yardstick to determine eligibility for recognition and assistance.

In Li Yiqing v Lamtex Holdings Ltd [2021] HKCFI 622, the Companies Court considered whether to put a Bermuda-incorporated company into immediate liquidation in Hong Kong or to adjourn the local winding-up petition to allow restructuring to proceed with the involvement of joint provisional liquidators appointed in Bermuda.

The highest profile duty to consult case this past year was the Federal Court of Appeal’s decision in Coldwater First Nation v. Canada (Attorney General), 2020 FCA 34, relating to the Trans Mountain Pipeline Expansion Project (TMX Project). This was a judicial review of the federal Cabinet’s decision to approve the TMX Project for the second time subject to numerous conditions. The TMX Project involves the twinning and expansion of an existing pipeline from Edmonton, Alberta to Burnaby, British Columbia.