Introduction

The Supreme People’s Court (“SPC”) and the Government of the Hong Kong Special Administrative Region have on 14 May 2021 signed the “Record of Meeting between the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region on the Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region”. Under the pilot program, liquidators from Hong Kong may apply to the relevant Intermediate People’ s Court at a pilot area in the Mainland for recognition of insolvency proceedings in Hong Kong. Likewise, insolvency administrators from the Mainland may apply to the High Court in Hong Kong for recognition of bankruptcy proceedings in the Mainland (the “Pilot Programme”). In the recent case of Re China All Access (Holdings) Ltd [2021] HKCFI 1842, the Court for the first time considered this recent development and the Pilot Programme.

Background

The company in question (the “Company”) was incorporated in the Cayman Islands and listed on the Main Board of the Hong Kong Stock Exchange (stock code: 633). The Company’s assets are located in the Mainland and Malaysia, with the majority of the assets located in Shenzhen. The operating subsidiaries are separated from the holding company by intermediate subsidiaries incorporated in the British Virgin Islands (“BVI”). A winding up petition was presented against the Company. The petition was previously adjourned in order to give the Company the opportunity to pay the debt which is not disputed. It transpired later that the cheque that was presented was dishonoured. The Petitioner thus pressed for an immediate winding up order.

Relevant laws

It is well established now that the following three core requirements must be satisfied before the court would exercise its discretionary jurisdiction to wind up a company incorporated in a foreign jurisdiction:-

1. There had to be a sufficient connection with Hong Kong, but this did not necessarily have to consist in the presence of assets within the jurisdiction;
   
2. There must be a reasonable possibility that the winding-up order would benefit those applying for it; and
   
3. The court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets.

The second core requirement had, until Shandong Chenming case, given rise to less controversy than the first core requirement. In China Huiyuan Juice Group Limited [2020] HKCFI 2940, the Court observed, amongst other things, that in determining whether the second core requirement is satisfied, the court will take a pragmatic approach. It will not be necessary for a petitioner to identify with great precision what the benefit will be or quantify with exactness the value of the benefit. But the petitioner must be able to point to a discernible and real benefit, i.e. a real possibility that a winding-up order would benefit the Petitioner.

The Court decision

Referring to the Pilot Program, the Court took the view that on the face of the matter it is reasonably likely that the liquidators appointed over the Company by the Hong Kong Court can be recognised in Shenzhen as the Company has its centre of main interest in Hong Kong and its principal assets are in Shenzhen. Similarly if action can be taken to appoint liquidators in Hong Kong over subsidiaries incorporated in the BVI, which also have their centre of main interest in Hong Kong, then the Hong Kong-appointed liquidators can be recognised in Shenzhen. Liquidators appointed over the BVI subsidiaries could then take steps to take control of the Mainland subsidiaries, of which the BVI subsidiaries are the immediate holding companies.

In addition, the Court found that the majority of the board of the Company reside in Hong Kong, and are, therefore, subject to the in personam jurisdiction of the Hong Kong court. It will, therefore, be possible for liquidators to seek orders from this court requiring the directors to execute documents necessary to enable the liquidators to take control of subsidiaries. The Court concluded that the Petitioner has demonstrated that there is a real possibility of the winding up order benefiting it and that the second core requirement is satisfied and made the normal winding up order.

Conclusion

Due to the fact that the evidence concerning the issues is not detailed and that the matter was dealt with in the Monday list, the Court’s decision in the present is rather brief. It is anticipated that the impact of the Pilot Programme will be explored in more details in future decisions.