Bermuda Court Exercises Discretion By Declining To Appoint Nominees Of First Creditors' Meeting

• Published date: 27 April 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Insolvency/Bankruptcy, Trials & Appeals & Compensation, Securities
• Law Firm: Kennedys Law LLP
• Author: Mr Nick Miles, Mark Chudleigh and Ciara Brady

Re Ping An Securities Group (Holdings) Limited [2022]

In Re Ping An Securities Group (Holdings) Limited [2022] SC (Bda) 25 Com (8 April 2022), the Supreme Court of Bermuda (the "Bermuda Court") declined to appoint the nominee of a first creditors' meeting, instead appointing a minority nominee in furtherance of the proper operation of the process of liquidation. The decision serves as a useful reminder of the facts that the jurisdiction to appoint liquidators following first meetings is discretionary and that creditor autonomy in the matter of appointments is not unlimited.

Earlier chapters in the history of the insolvency of Ping An Securities Group (Holdings) Limited (the "Company") formed part of a trend (along with Re Lamtex Holdings Ltd. [2021] HKCFI 622 and Re China Bozza Development Holdings Ltd [2021] HKCFI 1394) of stricter scrutiny shown by the Hong Kong Court towards the "light touch" provisional liquidation procedure used in Bermuda and the Cayman Islands, sometimes referred to in Hong Kong as the "Z-Obee technique".

In Re Ping An Securities Group (Holdings) Limited [2022], the Bermuda Court made judicious use of its appointment discretion to respond to this changing landscape while upholding traditional principles of private international law.

Kennedys (Nick Miles) represented the successful applicants, Yip Wa Ming and Lai Kar Yan of Deloitte Touche Tohmatsu ("Deloitte"), the joint liquidators of the Company appointed in Hong Kong.

Background

The Company is an exempted company incorporated in Bermuda with its shares listed on the Main Board of The Stock Exchange of Hong Kong. Through subsidiaries indirectly held via entities in the British Virgin Islands, it operated securities brokerage businesses in Hong Kong and held assets in the People's Republic of China.

A creditor's winding up petition was presented in Hong Kong in July 2020 in respect of the Company. In September 2020, the Company presented a winding up petition in Bermuda and made a successful application to the Bermuda Court for orders appointing individuals of RSM in Hong Kong and Rawlinson & Hunter in Bermuda as joint provisional liquidators of the Company with "soft" powers for restructuring purposes (the "JPLs").

At a hearing of the Hong Kong petition in March 2021, Harris J sitting in the Hong Kong Court of First Instance ("Hong Kong Court") granted orders for recognition of and assistance to the JPLs upon being satisfied that there was a tangible prospect of a restructuring.

However, he subsequently wound up the Company in May 2021, finding that a self-imposed timeline had not been adhered to, that the petitioner had not received from the JPLs all information that she should have and that the JPLs had filed evidence out of time before the hearing.

Upon the winding up of the Company in Hong Kong, the Official Receiver of Hong Kong ("ORHK") became the provisional liquidator. At the first meeting of creditors in July 2021, the votes of the holders of the majority of proofs of debt approved resolutions to appoint the JPLs as permanent liquidators. A competing resolution to appoint the Deloitte partners did not achieve a majority.

However, notwithstanding the outcome of the meeting, the ORHK applied to the Hong Kong Court for a Regulating Order (which dispenses with the need for first meetings) supported by a report claiming that the JPLs were not suitable as liquidators of the Company and recommending the appointment of alternatives.

Deloitte partners were then appointed as permanent liquidators by a Regulating Order of the...