Public policy, “No-Action” and arbitration clauses, and the substitution of petitioners

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.

Correcting a widespread mistake, Mr Justice Harris in Re China Ocean Industry Group Ltd [2021] HKCFI 247 held that the Court has no jurisdiction to make a validation order after a winding-up petition in respect of the issue of new shares and convertible bonds (“CBs”).

The correct position is that a company subject to a winding-up petition may issue new shares and CBs without a validation order.

Background to the widespread mistake and the present case

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 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 its debts in a bid to obtain adjournments of a winding up petition.

Prior to December 23, 2020, it had been unclear whether a court had the jurisdiction to grant an order assigning a contract without counterparty consent, on application by a court-appointed receiver (a “Receiver”).

Often in winding-up petitions, contributories of the company, for one reason or another, may wish to oppose the winding-up petition in their own right, including by filing evidence and making submissions at hearings. One major concern a contributory may have in deciding whether to take this course of action is of course the potential costs consequences, especially in the scenario where the opposition is ultimately unsuccessful and the company is wound up.

In Re Ando Credit Limited [2020] HKCFI 2775, the Honourable Mr Justice Harris appointed provisional liquidators over a Hong Kong- incorporated company, in an application  that broke ground as the first of its kind, made  with  the express purpose of  seeking  recognition  in  the Mainland.

In a year quite unlike any other, the landscape of Canadian restructuring law saw significant developments in 2020. The COVID-19 crisis put novel issues before the courts, challenged businesses in unforeseen ways and saw various supports and concessions offered to struggling businesses from governments and creditors. Ultimately, while the supports and concessions enabled many businesses to avoid insolvency proceedings in 2020, many others sought the protection of an insolvency filing, with industries such as the retail industry particularly impacted.

The Ontario Court of Appeal, in 7636156 Canada Inc. (Re), 2020 ONCA 681 (“7636156”), recently affirmed the autonomy of documentary letters of credit as valid security for the obligations of a tenant under a commercial lease when that lease is disclaimed by the tenant or the tenant’s trustee in bankruptcy.

Dans l’affaire de la Loi sur les arrangements avec les créanciers des compagnies (la « Lacc ») relative à Groupe Dynamite, le juge Kalichman de la Cour supérieure du Québec prononce un jugement au sujet de l’obligation d’un débiteur de payer un loyer post-dépôt dans un contexte où il ne peut pas utiliser les lieux loués.