DLA Piper Hong Kong recently represented Dr. Hui Chi Ming as a judgment creditor (Judgment Creditor) and petitioner to a bankruptcy proceeding against Mr. Koon Wing Yee (Debtor). In the judgment of Re Koon Wing Yee [2023] HKCFI 2301, the Court of First Instance made a bankruptcy order against the Debtor because he had failed to show a bona fide dispute on substantial grounds regarding the debt.

On August 17, 2023, China Evergrande Group, one of China’s largest real estate developers, and its affiliates filed chapter 15 petitions in the US Bankruptcy Court for the Southern District of New York in Manhattan seeking recognition of foreign restructuring proceedings in the High Court of Hong Kong and in the High Court of the Eastern Caribbean Supreme Court in the British Virgin Islands.

When a company is in the so-called “twilight zone” approaching insolvency, it is well-established that the directors’ fiduciary duties require them to take into account interest of creditors (the so-called “creditor duty”).

Three recent Hong Kong first instance court decisions have left undecided the question of whether a winding-up petition will trump an agreement to arbitrate when it comes to a winding-up and particularly in the context of cross-claims. A Court of Final Appeal decision this spring had seemed to provide pointers that the parties' agreement would be upheld but the issue – particularly when it comes to unmeritorious and late arbitration applications – is dividing the courts.

A recent judgment of the United Kingdom Supreme Court in Brake & Anor v The Chedington Court Estate Ltd [2023] UKSC 29 (10 August 2023) is likely to be a welcome decision for liquidators and trustees in bankruptcy in setting clear boundaries as to who has standing to challenge their decision-making in corporate or personal insolvency contexts.

The Cayman Islands Grand Court recently delivered its judgment in Re Shinsun Holdings (Group) Co., Ltd. FSD 192 of 2022 (DDJ) (21 April 2023) (unreported) (the “Shinsun Judgment”) in which the court determined the ultimate beneficial owner of bonds, held through Euroclear, did not have standing or authority to progress a winding up petition as a contingent creditor. In this article, we explore similar cases in other offshore and common law jurisdictions.

Shinsun Judgment and the Cayman Position

Re Gatecoin Limited (Gatecoin) is a landmark decision concerning the winding-up of a cryptocurrency exchange.

Background

Liquidators secured over 50 types of cryptocurrencies with an aggregate value of over HK$140m. To aid the liquidator’s allocation of the seized cryptocurrencies, the Court of First Instance decided two key issues.

Decision

The court held that:

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.

Hong Kong’s Court of Final Appeal (CFA) recently handed down its judgment in the case of Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP [2023] HKCFA 9, upholding the Court of Appeal's earlier decision that a creditor's bankruptcy petition presented in Hong Kong should not be allowed to proceed where the petitioned debt is disputed and arises from an agreement with an exclusive jurisdiction clause (EJC) in favour of a foreign court.

In Simplicity & Vogue Retailing (HK) Co., Limited [2023] HKCFI 1443, the Hong Kong Companies Court (the “Court“) made a winding up order against the Company on the basis that it failed to pay security in time. In considering the Company’s opposition grounds, the Court commented that it retains discretion to wind up a company in cases involving an arbitration clause.