INTRODUCTION

The use of trusts for asset protection purposes is well established and – in principle – not improper. However, recent history has seen increasing attempts by creditors to have transfers of assets unwound. A recent UK Supreme Court case saw the Court effectively achieve this by way of a resulting trust finding.1 This article considers the issue from a different angle: insolvency legislation.

The Hong Kong Court of Final Appeal (the “CFA“) has clarified in a recent judgment the application of section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (“CWUMPO“) and when the court will grant a validation order.

In a long-awaited development of cross-border insolvency cooperation between Hong Kong and Mainland China, the Hong Kong Court has granted recognition and assistance to Mainland liquidators for the first time in Joint and Several Liquidators of CEFC Shanghai International Group Ltd [2020] HKCFI 167.

Background

In the recent case of Official Receiver v Zhi Charles (FACV 8/2015) (5 November 2015), the Court of Final Appeal (the "CFA") found s 30A(10)(a) of the Bankruptcy Ordinance (Cap 6) (the "BO") unconstitutional.

Initial arrangements have been put in place for mutual recognition and assistance to be provided by courts in Mainland China and Hong Kong in respect of corporate insolvency proceedings. This is a significant and long awaited development which could substantially enhance the ability for cross border insolvencies and restructurings to be administered and implemented across the two jurisdictions.

The Court of First Instance has recently helpfully summarised the legal position on schemes of arrangement under both Hong Kong law and English law. Notably, it has called for further development in cross-border coordination in order to avoid the trouble of parallel insolvency proceedings and it has raised a red flag in relation to detailed disclosure of restructuring costs: Da Yu Financial Holdings Limited [2019] HKCFI 2531.

In Wong Tak Man, Stephen & Another v Cheung Siu Fai & Ors [2015] HMP 1431/2012, the Court held that transfers of funds made by a bankrupt were not transactions at undervalue or unfair preferences pursuant to s49 and s50 of the Bankruptcy Ordinance (the "BO"). This case serves as a useful reminder on how the Court will interpret s49 and s50 BO, as deemed to be applied in a corporate context by s.266B(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32).

Facts 

A recent pair of decisions of the Hong Kong Companies Court (the “Court”) has immense potential significance for debtor companies listed on the Stock Exchange of Hong Kong (“HKEx”) and their Hong Kong creditors.

Facts

Re Lamtex Holdings Ltd [2021] HKCFI 622 and Re Ping An Securities Group (Holdings) Ltd [2021] HKCFI 651 both involved a familiar factual scenario:

In But Ka Chon v Interactive Brokers LLC [2019] HKCA 873, the Hong Kong Court of Appeal dismissed an appeal to set aside a statutory demand arising out of online forex futures trading debts.

In its landmark decision of Kam Leung Sui Kwan v Kam Kwan Lai & Ors FACV 4/2015, issued yesterday, the Court of Final Appeal has brought some closure to the long running Yung Kee restaurant matter by making a winding up order against Yung Kee Holdings Limited (YKHL) with a 28-day stay to allow the parties to consider possible buy-out opportunities.  This reverses the previous decisions in the Court of First Instance and the