Voluntary administration is Australia’s primary business rescue regime. This article is Part 1 of a two-part series. This article provides an introductory overview of voluntary administration in Australia, explaining what it is, why entities might enter it and its processes. It is not intended to be used as an exhaustive guide to Australia’s voluntary administration regime and its many nuances.
As the public may be aware, there are ways to put a company into liquidation, one of which is what is called “soft-touch” liquidation. The definition of the soft-touch liquidation was set out in a British Virgin Islands judgment — Re Constellation Overseas Ltd BVIHC (Com) 2018/0206, 0207, 0208, 0210 & 0212. It was held that the essence of a soft-touch provisional liquidation is that a company remains under the day- to-day control of the directors but is protected against actions by individual creditors.
When creditors try to recover debt from a distressed company in different jurisdictions, they will incur significant costs. In particular, in Hong Kong, the creditors could apply to the High Court for sanctioning a scheme of arrangement, in the hope of settling the debt. While the High Court would decide on whether it is appropriate to sanction the scheme, it would also consider if it is appropriate for the creditors to pursue parallel proceedings in multiple jurisdictions.
Introduction
In the recent case of Re Grand Peace Group Holdings Ltd [2021] HKCFI 2361, which concerns the winding-up of a foreign incorporated listed company, the Court of First Instance revisited the 2nd core requirement and considered whether the possibility of the court making an order to compel the directors of the company to execute the documents necessary for the liquidators to take control of the company’s BVI subsidiaries would be sufficient to be considered as a real possibility of benefit to the petitioner.
The recent case of Re China Bozza Development Holdings Ltd [2021] HKLRD 977 demonstrated the attitude and increased scrutiny of the Hong Kong Companies’ Court towards offshore soft-touch provisional liquidation.
The leading authority on the meaning of soft-touch is the British Virgin Islands case of Re Constellation Overseas Ltd BVIHC (Com) 2018/0206,0207,0208, 0210 and 0212 . (§3) :
Test for risk of dissipation
In Short
1 Contact Information If you have any questions concerning this update, please contact: Naomi Moore Partner [email protected] Hong Kong +852 3694.3050 Abid Qureshi Partner [email protected] New York +1 212.872.8027 Liz Osborne Partner
SU M M ER 2 02 1 | I F LR .C O M | 1 T he Hong Kong Companies Court has made a number of rulings concerning mainland Chinese corporate groups listed in Hong Kong SAR which illustrate the evolving landscape of cross-border insolvency law.These cases may, in some instances, cause creditors and debtors to re-evaluate some of the enforcement and defensive strategies traditionally used in the insolvencies of such companies.
Introduction
Rather unfortunately, there are no statutory provisions available to a company to set aside a statutory demand. If a company is served with a statutory demand and disputes the alleged debt, save for agreeing with the alleged creditor not to present a winding-up petition, it has no alternative but to seek relief from the court and obtain an injunction restraining the presentation of a winding-up petition.