Cross-Border Insolvency: Guidance From The Companies Judge

The last two years have seen a number of foreign incorporated companies generating court decisions in Hong Kong that provide timely and important guidance in windings-up with cross-border issues.

1 The decision of the Honourable Mr. Justice Harris in L v. G Limited (HCCW 318/2015) is a recent addition to this stream of authorities.

The subject company in this case (G Ltd) was incorporated in the Cayman Islands and is listed in Hong Kong. An application to appoint provisional liquidators (PLs) came before the learned Companies Judge on 2 October 2015, when G Ltd. had petitioned the Cayman Islands court for its own winding-up and its application to appoint PLs was due to be heard in the Cayman Islands on 8 October 2015.

His Lordship adjourned the application pending the outcome of the hearing in the Cayman Islands. PLs were appointed there on 8 October 2015. The adjourned hearing of the application in Hong Kong took place before his Lordship on 16 October 2015.

The Hong Kong application was dismissed, with the Cayman Islands court having been seized of the matter and having appointed the PLs, because "at common law the [Hong Kong] court has the power to recognise foreign liquidators and to assist them in carrying out their functions" (paragraph 5). On the facts, the PLs saw no need to seek recognition here immediately, and his Lordship considered this position sensible.

Although the Hong Kong proceedings in this case were commenced by an individual referred to as "L" by his Lordship, the decision contains statements of principle relevant to other fact patterns. As noted in the previous paragraph, the Hong Kong court would take into account the view of the office-holders appointed in the overseas jurisdiction as to whether parallel proceedings in Hong Kong would serve any benefit. The office-holders should turn their minds to the usefulness of parallel proceedings, irrespective of whether they, or some other party, were to commence the same.

Related to this aspect, insolvency practitioners would do well to bear in mind paragraph 6 of the decision:

"... in the conventional case one would expect an insolvent company to be wound up in its place of incorporation and for its liquidators to consider whether or not it is necessary to seek recognition and potentially assistance from the court in Hong Kong. If they do the most straightforward way for them to proceed is to obtain a letter of request from the local court and then apply exparte on paper...