It has long been considered that lenders under a syndicated facility retain a right to seek to recover their portion of a loan directly following a payment default, typically by seeking the winding up of obligors. This is based on the several nature of the rights of finance parties which appears in clause 2 of the standard LMA terms. 

The case of Re Company A-E [2015] HCMP 2019/2015 demonstrates that the Court will take a practical approach in determining whether a funding arrangement infringes upon the common law rules against maintenance and champerty. The Court will consider commercial factors, such as the underlying rationale for the funding arrangement and the commercial character of the funder, alongside its analysis of the common law principles.

Hong Kong Court records available publicly today show that a Petition was presented last Friday to wind up O.W. Bunker China Ltd (a Hong Kong company).  The records indicate that the Winding-up Petition was presented by the company itself rather than a creditor.  This is consistent with the steps taken by other companies within the OW Bunker group to seek Court protection.

Generally with a winding-up petition, if the petitioner is successful in obtaining a winding-up order, the petitioner will have its costs of the  proceedings. If, on the other hand, the petition is dismissed, then the petitioner has been  unsuccessful and it should pay the costs of the proceedings. We explore the Companies Court’s  treatment of costs in three recent decisions below.

From what Assets should a Petitioner have its Costs?

The Hong Kong court has held that, in determining whether it should exercise its jurisdiction to sanction a scheme of arrangement in respect of the debts of an insolvent foreign company, the factors to take into account include whether any of the debts are governed by Hong Kong law, such that they would be discharged by an order sanctioning the scheme, and whether sanctioning the scheme would foster comity.

Introduction

While most jurisdictions provide liquidators with wide investigative powers to locate and realise assets locally, the exercise of such powers becomes more complicated when the assets are situated overseas. As more and more businesses expand globally and corporate structures become equally more complex, the liquidators' task becomes more problematic in winding up such companies.

A bankrupt can be required to pay a portion of his income earned during the bankruptcy to his or her trustees by way of a contribution to the bankrupt estate. Such payments can be fixed by the court pursuant to section 43E of the Bankruptcy Ordinance (Cap 6 of the Laws of Hong Kong) or agreed between the bankrupt and the trustees on an informal basis, and are calculated after assessing the bankrupt's reasonable expenses.

Recent developments

The Hong Kong Government has released its major proposals for introducing a new statutory corporate rescue procedure. At the same time, it has published the consultation conclusions for improving the corporate insolvency and winding up provisions in the Companies (Winding Up and Miscellaneous Provisions Ordinance) (Chapter 32) (“C(WUMP)O”). The Government plans to introduce an amendment bill into the Legislative Council in 2015.

Implications for companies

On 17 July 2014, the Hong Kong Court of Final Appeal gave judgment in the case of Moulin Global Eyecare Holdings Limited (in liquidation) (formerly known as Moulin International Holdings Limited) v Olivia Lee Sin Mei FACV No. 23 of 2013,providing helpful guidance on the expiry of applicable limitation periods.

Background

Did you know that a liquidator of a foreign company may seek the assistance of the Hong Kong Court to obtain orders for the production of information which orders are, in substance, of the type made in Hong Kong windings-up under section 221(3) of the Companies (Winding-up and Miscellaneous Provisions) Ordinance?