R&I Update – September 2021 – 4 / 5 观点
In May 2021, a landmark co-operation mechanism was implemented between Hong Kong and Mainland China in cross-border insolvency matters.
Liquidators from Hong Kong can now apply to the courts in three Mainland "pilot cities" (ie Shanghai, Shenzhen and Xiamen) for recognition and assistance, provided that:
Likewise, bankruptcy administrators from the Mainland may apply to the High Court of Hong Kong for recognition and assistance.
The new co-operation mechanism was applied by the courts in two recent Hong Kong cases:
Sampson Paper Company Limited is a Hong Kong company in insolvent liquidation with substantial assets in Shenzhen. The court held that it was appropriate for the High Court of Hong Kong to request the Shenzhen Intermediate People's Court make an order recognising the appointed liquidators and providing assistance to them.
China All Access (Holdings) Ltd is a Hong Kong-listed Cayman Islands company with substantial assets in Shenzhen. The argument here was that liquidators would have difficulties taking control of the company's operating subsidiaries in the Mainland held through intermediate subsidiaries incorporated in the BVI.
The court considered it reasonably likely that the liquidators appointed over the company by the Hong Kong Court can be recognised in Shenzhen, as the company has its COMI in Hong Kong and substantial assets in Shenzhen. Similarly, liquidators appointed in Hong Kong over the BVI incorporated subsidiaries whose COMI is in Hong Kong can be recognised in Shenzhen.
As such, liquidators appointed over the BVI subsidiaries can take steps to take control of the Mainland subsidiaries.
To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.