In Shandong Chenming Paper Holdings Limited v Arjowiggins HKK2 Limited [2022] HKCFA 11, the Court of Final Appeal has confirmed that the "leverage" created by the prospect of a winding-up – as opposed to the making of a winding-up order – provides a legitimate form of "benefit" for the purposes of satisfying the second of the three "core requirements" for winding up a foreign incorporated company in Hong Kong.
With priming transactions experiencing a resurgence over the past few years, there have been a number of different routes taken by lenders with one goal in mind - Assemble a majority position and exchange, refinance or otherwise abandon their existing positions to move up the capital structure, which in turn helps increase their blended return on their exposure to a borrower and prevents a different configuration of investors from grabbing the “high ground” above them.
Seahawk China Dynamic Fund [2022] HKCFI 1994 (date of reasons for decision: 4 July 2022)
Introduction
The Bankruptcy Protector
In Enter. Bank v. The Ingros Fam. LLC, et al., 2022 WL 2283392 (Bankr. W.D. Pa. June 23, 2022), a lender faced a potentially costly decision when it mistakenly left the word “The” from a borrower’s name.
Investors in a scheme that seems too good to be true should be aware that they may be liable to return the funds under principles of unjust enrichment or bankruptcy preference laws.
Bankruptcy – and the restructuring process – are challenging and complex endeavors, requiring a variety of tactics and resolution mechanisms. For the parties involved, financial expectations can be at odds with the reality of the situation, and knowing when to compromise and how best to proceed for your organization’s specific needs is essential.
On 24 June 2022, the Honourable Mr Justice Harris (of the High Court of Hong Kong Special Administrative Region) granted assistance to Cayman Islands appointed Joint Provisional Liquidators (the “JPLs”) of Seahawk China Dynamic Fund, a solvent company incorporated in the Cayman Islands (the “Company”). Harris J ruled that the JPLs have the power to act as agents of the Company in Hong Kong. Reasons were delivered on 4 July 2022.
The perceived costs of proposing a restructuring plan are seen to be the biggest inhibitors to using the process for SMEs. It is still a relatively new tool and insolvency practitioners, lawyers and the courts are still grappling with it, but as we have seen recently in Amigo Loans it can provide creative and innovative restructuring solutions[1].
What this means for the shareholders of a business facing insolvency
In a consultation commenced on 7 July 2022, the UK Insolvency Service is proposing to implement two “model laws” adopted by the United Nations Commission on International Trade Law (UNCITRAL).