Winding up a foreign company: 2nd core requirement considered in details where the company’s principal assets are shares in delisted companies in Hong Kong



In the recent case of Re Victor River Ltd [2021] HKCFI 886, which concerns the winding-up of a foreign company, the Court of First Instance applied the long-developed three core requirements which must be satisfied before exercising discretionary jurisdiction of the Court. In particular, the Court discussed how the holding of shares in a delisted company may impact on the Court’s consideration of the three core requirements.

Winding up a foreign company: 2nd core requirement considered in details where the company’s principal assets are shares in delisted companies in Hong Kong把外國公司清盤:假如清盤公司的主要資產是香港已除牌公司的股份, 法院如何詳細考慮第二項核心要求


Victor River Limited (the “Company”) is an investment holding company incorporated in the British Virgin Islands and it traded in various listed securities in Hong Kong. Pursuant to a facility letter issued in March 2018 (the “Facility Letter”), the Company obtained a HK$400 million margin loan facility from the petitioner (the “Petitioner”), with whom the Company had a margin securities trading account (the “Margin Account”). After the facility became expired, the Petitioner issued numerous margin call letters and emails but the Company failed to make good the margin deficit. The Petitioner then liquidated some of the securities held in the Margin Account, but was still owed over HK$100 million by the Company. There remained over 1.6 million shares in Haitian Energy International Limited (“Haitian Energy”) in the Margin Account (the “Haitian Shares”). Haitian Energy is a company listed on the Hong Kong Stock Exchange (stock code: 1659) and was recently delisted by the HKEX on 7 December 2020.

On 27 August 2019, the Petitioner served a statutory demand on the Company. Following the Company’s failure to satisfy the statutory demand, the Petitioner presented the winding-up petition on 24 October 2019 under section 327(3)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32) (the “CWUMPO”).

The legal principle of winding up foreign companies

It is now well established that in considering whether to exercise discretionary jurisdiction to wind up a foreign company, the Court will have regard to the three core requirements, namely, that: (1) the foreign company had a sufficient connection with Hong Kong; (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 interested in the distribution of the company’s assets.

Court’s rulings

(1)   Sufficient connection with Hong Kong

On the facts, the Court found that the Company had a sufficient connection with Hong Kong. The relevant facts identified by the Court include: (i) the Company’s sole commercial purpose is to act as an investment holding vehicle in respect of investments and trading in listed companies in Hong Kong; (ii) the Facility Letter was negotiated, executed and performed in Hong Kong: International Westminster Bank Plc v Okeanos Maritime Corp [1987] 3 All ER 137; (iii) the sole director and shareholder of the Company is an individual with a Hong Kong correspondence address provided in the Facility Letter; and (iv) the Haitian Shares are capable of being traded in Hong Kong despite the delisting.

(2)   Real possibility of benefit to the Petitioner

The Court’s position on the second core requirement after the recent judgment Re China Huiyuan Group Ltd [2020] HKCFI 2940 is that, it is not necessary for a petitioner to identify with great precision what the benefit will be or quantify with exactness the value of the benefit, as long as the benefit can be said to be a real possibility rather than a merely theoretical one. In the present case, the Court agreed that a winding-up order in Hong Kong has a real possibility in bringing benefit to the Petitioner, in particular:

1.     as the only known assets of the Company are the Haitian Shares, a liquidator appointed can help investigate the financial position of the Company and ascertain other assets that could be realised;

2.     the liquidators can exercise the Company’s rights to protect or maximise the value of Haitian Shares, such as enquiring into the restructuring of Haitian Energy as a substantial shareholder; and

3.     the liquidators will be in better position to identify any potential buyers who are interested in the Haitian Shares.

Regarding the fact that the Haitian Shares are likely to be of limited value following Haitian Energy’s delisting, the Court was of the view that the delisting may or may not have affected the value of Haitian Shares to be realised by way of restructuring.  Therefore, at the present stage it could not be said the prospect of realising the value of Haitian Shares through appointment of a Hong Kong liquidator of the Company is a theoretical one.

On the point that both Haitian Energy and the Company are foreign companies and Hong Kong liquidators will not be recognised by the foreign courts, the Court was of the view that this will not defeat a real possibility of benefit to the Petitioner, as a Hong Kong liquidator will be able to enforce the Company’s right as shareholder of Haitian Energy within Hong Kong and will not need the recognition of foreign courts to sell or realise value of the Haitian Shares, since Haitian Shares, despite the delisting, are capable of being transferred and traded in Hong Kong.

(3)   Jurisdiction over person(s) interested in distribution of assets

The third core requirement can generally be satisfied by the presence of a creditor holding a material portion of the debt of the Company (China Medical Technologies Inc [2014] 2 HKLRD 997). In the present case, the Petitioner, being a creditor of substantial amount of the Company, is incorporated with established business presence in Hong Kong and is clearly subject to the jurisdiction of Hong Kong Court.

In conclusion the Court made the usual winding up order against the Company.


This case is important as it illustrates how the Court will approach the 2nd core requirement after the Huiyuan Juice case.  Despite the diminishing value of the shares as a result of the delisting, the Court nevertheless found that there is a real possibility of benefit of a winding-up order to the Petitioner.  Further, the fact that the liquidator appointed by the Hong Kong Court may not be recognised by the company’s place of incorporation does not deter the Court as such liquidator could still perform valuable work within Hong Kong. It remains to be seen whether the Court will continue to adopt such a liberal approach in the future.


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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

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