Latest developments in Hong Kong restructuring law

This is an Insight article, written by a selected partner as part of GRR's co-published content. Read more on Insight

In summary

This article introduces the potential features of a new corporate rescue bill; the courts’ rulings on interactions between winding-up petitions and arbitration agreements; the general principles in recognising and assisting cross-border insolvency proceedings in Hong Kong; and the new arrangement of mutual recognition of and assistance to bankruptcy proceedings between Hong Kong and mainland China.

Discussion points

  • Development of the corporate rescue legal framework in Hong Kong
  • Interactions between winding-up petitions and arbitration agreements
  • Recognition of cross-border insolvency proceedings
  • Recognition of foreign provisional liquidators appointed on a soft-touch basis
  • Recent developments on sanctioning schemes of arrangement
  • Hong Kong–mainland China mutual recognition of and assistance in bankruptcy proceedings

Referenced in this article

  • Re Hong Kong Bai Yuan International Business Co Ltd
  • Re CEFC Shanghai International Group Ltd
  • Nuoxi Capital Ltd and Others v Peking University Founder Group Co Ltd
  • Re Lamtex Holdings Ltd
  • Re China Singyes Solar Technologies Holdings Ltd
  • Re Samson Paper Co Ltd
  • Re Guangdong Overseas Construction Corporation


As a special administrative region of China under the ‘one country, two systems’ principle, Hong Kong retains a common law legal system that is different from the system of law in mainland China.

As one of the world’s leading international financial centres, Hong Kong is a prime location for financial services and is home to many financial institutions. With minimal government intervention, Hong Kong’s financial markets operate under effective and transparent regulations that are in line with international standards and have attracted foreign investments from investors around the world.

Hong Kong also plays a vital role in offshore fundraising for Chinese enterprises. As at the end of 2022, 1,409 Chinese companies were listed in Hong Kong – comprising H-share, red-chip and private companies – with total market capitalisation of around US$3.5 trillion or 77 per cent of the market total. Since 1993, Chinese companies have raised more than US$1.048 trillion via stock offerings in Hong Kong.[1]

The promulgation of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area on 18 February 2019 further solidified Hong Kong’s role as the super connector in the development of the Greater Bay Area.

On 14 May 2021, a record of meeting concerning the mutual recognition of and assistance in insolvency proceedings between Hong Kong and mainland China[2] (the Record of Meeting) was signed, fostering further legal cooperation in civil and commercial matters between Hong Kong and mainland China (the Cooperation Arrangement). At the time of writing, this mutual recognition and assistance mechanism applies to three mainland China cities (Shanghai, Xiamen and Shenzhen) as pilot cities given their close trade ties with Hong Kong.

It is expected that Hong Kong, with the full support of the central government, will proactively integrate itself into the national development process, thereby generating new impetus for growth to bring new development opportunities to different sectors of the community.[3]

Development of the corporate rescue legal framework in Hong Kong

In Hong Kong, corporate insolvency is primarily governed by the remaining provisions of the the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32),[4] as amended by the Companies (Winding Up and Miscellaneous Provisions) Amendment Ordinance, which came into effect on 13 February 2017 (the Amendment Ordinance).

There is no statutory restructuring procedure available under Hong Kong law; however, it is possible for creditors of a Hong Kong company to negotiate an informal contractual restructuring agreement with the company, which will in general require the cooperation of all creditors of the company as any one creditor may still exercise its right to wind up the company. It is only possible to achieve a corporate rescue of a financially distressed company in Hong Kong through an out-of-court workout or a scheme of arrangement, or by following the appointment of provisional liquidators, which leaves the company’s creditors with limited options to rescue the company in times of financial difficulty.

Due to the covid-19 pandemic, the number of corporate failures has soared. In March 2020, the Hong Kong government announced that the drafting of the new Companies (Corporate Rescue) Bill (the Bill) had reached an advanced stage. It intended to hold a fresh round of consultations on specific areas in the Bill, with the aim of finalising it for introduction to the Legislative Council in the first half of the 2020/2021 legislative session; however, in June 2021, given the complexity of the issues, the number of the stakeholders involved and the different views expressed, the Hong Kong government indicated that it would continue to engage stakeholders to refine the legislative instructions.[5] At the time of writing, there have been no further updates as to when the Bill will be put on a legislation timetable in the Legislative Council.

However, for financial institutions facing difficulties, the Financial Institutions (Resolution) Ordinance (Cap 628) contains provisions that restrict counterparties from triggering certain default event provisions solely owing to the financial institutions’ entry into resolution or exercise of resolution powers, provided that the substantive obligations provided for in the relevant contracts continue to be performed. These provisions, including an instrument of a temporary stay on termination rights for up to two business days, provide strong support for the orderly resolution of failing financial institutions.

Moreover, under the non-statutory guidelines jointly issued by the Hong Kong Monetary Authority and the Hong Kong Association of Banks in 1999, banks should demonstrate a supportive attitude to borrowers experiencing financial difficulties, ensure sufficient liquidity to borrowers and ‘should not withdraw their existing facilities or hastily put the borrower into receivership, or issue writs demanding repayment’.[6]

Recent developments on the interaction between winding-up petitions and arbitration agreements

As an international arbitration hub, and with growing policy emphasis on the use of arbitration, the Hong Kong courts have seen a growing number of winding-up cases where the parties’ underlying agreement contains an arbitration agreement. The impact of such an arbitration agreement on the courts’ discretion to grant a winding-up order has been reviewed by the courts.

Traditional approach

Traditionally, the courts will only dismiss a winding-up petition in favour of arbitration if the opposing debtor is able to prove that it has a bona fide defence on substantial grounds to the underlying debt. This is because winding-up petitions are considered a class remedy available to all creditors and do not involve the enforcement of a creditor’s rights against the debtor.

In practice, the courts will grant the creditor’s application to wind up the debtor if the debtor has failed to pay a debt without a credible defence, without requiring the parties to commence arbitration (the traditional approach).

Re Southwest Pacific Bauxite (HK) Ltd

In 2018, Mr Justice Jonathan Harris, being the judge in charge of the Companies Court, in Re Southwest Pacific Bauxite (HK) Ltd[7] broadly followed the English Court of Appeal’s approach in Salford Estates (No. 2) Ltd v Altomart Ltd (No. 2),[8] giving substantial weight to the policy consideration underlying the Arbitration Ordinance (Cap 609), which encourages and supports party autonomy in determining the means by which a dispute arising between them should be resolved.

Citing the related authorities, Mr Justice Jonathan Harris held that the courts should generally dismiss an insolvency petition in favour of arbitration when the following three requirements are met:

  • the opposing debtor disputes the petitioning debt (it is sufficient for the debtor to show that the debt is not admitted);
  • the contract under which the petitioning debt is alleged to arise contains an arbitration clause that covers any dispute relating to the debt; and
  • the opposing debtor takes steps required under the arbitration clause to commence the contractually mandated dispute resolution process (the Lasmos approach).

Under the Lasmos approach, the debtor is able to stay insolvency proceedings in Hong Kong, simply by not admitting the underlying debt, and force the creditor to arbitrate, even though there may not be any real dispute on the debt. The ruling in the Lasmos case established a substantial obstacle to winding-up petitioners where the underlying agreements contain an arbitration clause.

But Ka Chon v Interactive Brokers LLC

In mid-2019, the Lasmos approach was further considered in But Ka Chon v Interactive Brokers LLC[9] by the Hong Kong Court of Appeal on an obiter basis. In light of the statutory right conferred on creditors to petition for the winding up or bankruptcy of an insolvent debtor, the Court of Appeal took the view that such right is part of Hong Kong law, and absent any evidence of the legislative intent of the Arbitration Ordinance to change the insolvency legislation, the Lasmos approach represents ‘a substantial curtailment’ of creditors’ statutory rights by suggesting that the courts may dismiss any petition in favour of arbitration where the three requirements are met.

Although it remained to be seen how the Court of Appeal would eventually rule in the future, and each case would be decided based on its facts, these obiter remarks indicated that there might be a possibility that it might not follow the Lasmos approach.

Post-Lasmos cases

In Dayang (HK) Marine Shipping Co Ltd v Asia Master Logistics Ltd[10] handed down on 12 March 2020, Deputy High Court Judge William Wong SC deviated from the Lasmos approach and held that to dispute the existence of a debt, a debtor must show there is a bona fide dispute on substantial grounds, and that a bare denial or non-admission of the debt is not enough, regardless of whether the debt has arisen from a contract incorporating an arbitration clause. Further, the court must exercise discretion, irrespective of whether there is an arbitration agreement, and commencing arbitration proceedings itself is not sufficient proof of the existence of a bona fide dispute on substantial grounds, but may constitute relevant evidence of such a dispute.

Subsequent to the Dayang case, the Hong Kong court again visited the vexing question regarding the interplay between a creditor’s winding-up petition and an arbitration clause in Re Hong Kong Bai Yuan International Business Co Ltd[11] from March 2022. In choosing between the Hong Kong approach (ie, to demonstrate a bona fide dispute on substantial grounds) and the English and Singaporean approach (ie, to meet the prima facie standard), Madam Justice Linda Chan held that the debtor bears the onus to show there has been ‘a genuine dispute on the debt which requires the determination of an arbitral tribunal’ in either approach. The court refused to follow the Lasmos approach and held that, although in its exercise of discretion the court would give considerable weight to the existence of an arbitration agreement between the parties as well as other relevant circumstances, it would be incumbent upon the debtor to show a genuine dispute on the debt requiring the determination of an arbitral tribunal.

Akin to the reasoning in the But Ka Chon and Dayang cases, the court in the Hong Kong Bai Yuan case relied primarily on the modern approach in deciding in favour of the creditor. Based on recent legal developments and a string of post-Lasmos cases, it appears that the existence of an arbitration agreement without a genuine or bona fide dispute in respect of the debt may not by itself guarantee a stay or dismissal of a winding-up petition. Whether the Lasmos approach will be followed in future decisions remains to be seen.

Recognition of cross-border insolvency proceedings under common law

At the time of writing, Hong Kong is not a signatory to, and has not enacted, the UNCITRAL Model Law on Cross-Border Insolvency. The Hong Kong courts are armed with the power to recognise and assist cross-border insolvency proceedings derived from common law and the legal doctrine of modified universalism.

In recent years, there has been a proliferation of recognition and assistance orders granted by the Hong Kong courts, most commonly to facilitate the debt restructuring of Hong Kong-listed companies incorporated in an offshore jurisdiction.[12]

However, in Re CEFC Shanghai International Group Ltd,[13] for the first time the Hong Kong courts granted an order for recognition and assistance to liquidators of a mainland China-incorporated company.

It was held that two criteria must be satisfied before recognition and assistance are granted to insolvency proceedings opened in a civil law jurisdiction: first, the foreign insolvency proceedings must be collective insolvency proceedings; and second, the foreign insolvency proceedings must be opened in the company’s country of incorporation.[14] In granting the recognition, the court was satisfied that the mainland liquidation was a collective insolvency proceeding and thus qualified for recognition in Hong Kong.

In the course of its reasoning, the court refused to follow the English decision in Galbraith v Grimshaw, wherein the House of Lords chose not to stay a garnishee order application, despite there being an appointment of trustee in bankruptcy.[15] Mr Justice Jonathan Harris concluded that the decision in Galbraith was ‘inconsistent with contemporary cross-border insolvency law, given that it was made well before the development of common law cross-border insolvency assistance’.

In 2021, upon the administrator’s application and receipt of a letter of request from the Hainan Province Higher People’s Court, the Hong Kong court in Re HNA Group Co Ltd[16] granted the first-ever order for recognition of and assistance to reorganisation proceedings in mainland China. Applying the two well-settled criteria from Re CEFC Shanghai International Group Ltd, Mr Justice Jonathan Harris found that the reorganisation proceedings constituted a collective insolvency process and took place in mainland China where the distressed company was incorporated.

While acknowledging the fact that the Cooperation Arrangement signed by the Secretary for Justice and the Supreme People’s Court on 14 May 2021 did not include Hainan as one of the pilot cities, and the possibility that the Hainan court would not recognise Hong Kong insolvency proceedings and liquidators, the Hong Kong court concluded that this lack of reciprocity was not an automatic bar to recognition.

In Re Guangdong Overseas Construction Corporation, for which the judgment was delivered on 17 May 2023,[17] Madam Justice Linda Chan confirmed Mr Justice Jonathan Harris’ ruling in Re HNA Group Co Ltd. The presiding judge granted an order for recognition and assistance in relation to liquidation proceedings commenced in the Guangzhou Intermediate People’s Court, notwithstanding that Guangzhou is not one of the pilot cities. For any future application relying on a letter of request issued by a court outside the pilot cities (ie, not falling within the scope of the Cooperation Arrangement), Madam Justice Linda Chan recommended the applicant to still follow the practice and procedure prescribed for applications under the Cooperation Arrangement so as to ensure consistency.

As cross-border insolvency is increasingly active in Hong Kong, the above three milestone cases exemplify the Hong Kong courts’ readiness, open-mindedness and welcoming attitude to provide recognition and assistance to cross-border insolvency proceedings. It is expected that Hong Kong cross-border insolvency law will continue to develop and mature, which would reinforce Hong Kong’s position as Asia’s leading financial and debt restructuring hub.

Cross-border insolvency and keepwell deeds

Keepwell deeds are a form of credit enhancement commonly adopted by Chinese companies to facilitate the issuance of offshore bonds by their subsidiaries. In Nuoxi Capital Ltd & Others v Peking University Founder Group Co Ltd[18] and Citicorp International Limited v Tsinghua Unigroup Co Ltd,[19] Mr Justice Jonathan Harris held that keepwell disputes should be determined in Hong Kong in accordance with the contractual exclusive jurisdiction clause, notwithstanding the court’s recognition of the keepwell provider’s mainland China insolvency proceedings.

In May 2023, the enforceability of keepwell deeds was for the first time confirmed by a Hong Kong court in Nuoxi Capital Ltd & Others v Peking University Founder Group Co Ltd.[20] This marks a momentous and groundbreaking decision in which a Hong Kong court has called for judicial cooperation between two courts in respect of insolvency proceedings (ie, with the Hong Kong court adjudicating on contractual disputes and the mainland China court working out the reorganisation).

Recognition of foreign voluntary liquidation

The principle of modified universalism is a common law power to recognise and assist foreign liquidation. The general rule is, according to Singularis Holdings Ltd v PricewaterhouseCoopers,[21] that this principle would not apply when the foreign liquidation is voluntary and that the company is balance-sheet solvent. An exception to the general rule can be found in Re Joint Liquidators of Supreme Tycoon Ltd,[22] wherein the courts held that the mere fact of a foreign liquidation being a voluntary liquidation does not prevent the court from recognising and assisting that liquidation under the principle of modified universalism.

Therefore, in considering whether a foreign insolvent liquidation commenced by a shareholders’ resolution is eligible for common law recognition and assistance, the key issue for cross-border insolvency assistance is not whether the foreign insolvency office holder is or is not an officer of the foreign court. Rather, what matters is whether the foreign insolvency proceeding is collective in nature in the sense that it is ‘a process of collective enforcement of debts for the benefit of the general body of creditors’.[23]

Even though the company’s liquidation was commenced by a shareholders’ resolution, it was observed by the court that the company’s liquidation was a collective insolvency proceeding; therefore, the court granted the recognition order sought to allow the liquidators appointed to investigate the affairs of the company.

However, where the foreign liquidation is a solvent liquidation that is more akin to a ‘private arrangement’ as referred to by the Privy Council in Singularis Holdings Ltd, it would not fall within the principle of modified universalism and, hence, would not be recognised or assisted by the court.

No approval for an examination that constitutes a fishing expedition

In Re A Civil Matter Now Pending in United States District Court for the Western District of Washington,[24] the court rejected two letters of request issued by the United States District Court, Western District of Washington at Seattle (the Washington Federal Court) seeking to compel two distressed debt investors in Hong Kong to appear and provide oral testimony regarding certain alleged receivables owing to a foreign company.

The court stressed that the discovery was sought against persons who were not party to the judgments made by the Washington Federal Court and was for the purpose of ‘plotting the course’ of unspecified, possible future proceedings; hence, the proposed examination was found to be a pretrial discovery, which was essentially a fishing expedition that ought to be prohibited under section 76(3) of the Evidence Ordinance (Cap 8).

Recognition of foreign provisional liquidator appointed on soft-touch basis

In recent cases, a Hong Kong court held that its lack of power to appoint provisional liquidators only for facilitating restructuring and corporate rescue (ie, on a soft-touch basis) does not prevent it from recognising and assisting foreign liquidators appointed for this purpose.

Re Joint Provisional Liquidators of Moody Technology Holdings Ltd

In Re Joint Provisional Liquidators of Moody Technology Holdings Ltd,[25] a Hong Kong court granted a recognition order to foreign provisional liquidators who were appointed on a soft-touch basis to explore and facilitate the restructuring of a company. This order was made despite soft-touch provisional liquidation being impermissible in Hong Kong.

The joint and several liquidators (JPLs) of Moody Technology Holdings Limited (Moody), a company incorporated in Bermuda, were appointed by an order made by the Supreme Court of Bermuda (the Bermuda Court). Moody’s JPLs applied to the Hong Kong court for recognising their appointment and powers as set out in the letter of request issued by the Bermuda Court.

Moody’s JPLs were appointed on a soft-touch basis to restructure Moody and its debts in Bermuda. The key question before the Hong Kong court was whether it should give recognition to Moody’s JPLs even though, under current Hong Kong law according to the Court of Appeal decision in Re Legend International Resorts Ltd,[26] soft-touch provisional liquidation is impermissible.

The court held that where circumstances warrant appointment of provisional liquidators, the provisional liquidators may be granted powers to explore and facilitate a restructuring of the company.

Re the Joint and Several Provisional Liquidators of China Oil Gangran Energy Group Holdings Limited

In Re the Joint and Several Provisional Liquidators of China Oil Gangran Energy Group Holdings Limited,[27] a Hong Kong court continued the trend of recognising foreign soft-touch provisional liquidators.

Joint and several provisional liquidators were appointed over China Oil Gangran Energy Group Holdings Limited (China Oil’s JPLs) by a Cayman court with a view to pursuing a debt restructuring. China Oil’s JPLs applied to the Hong Kong court for recognition of their appointment.

The court considered the general principles of recognising foreign insolvency proceedings in Re CEFC Shanghai International Group Ltd and its past practice of recognising foreign soft-touch provisional liquidation,[28] and accordingly granted the recognition order.

These two decisions reflect the Hong Kong courts’ commitment to universalism and its position to facilitate cross-border restructurings. Although the Hong Kong courts may not appoint domestic soft-touch provisional liquidators, the same does not constitute a bar to recognising and assisting foreign soft-touch provisional liquidators.

Problematic use of soft-touch provisional liquidation

In Re Lamtex Holdings Ltd,[29] the court refused to grant the adjournment of the winding-up petition sought by the joint provisional liquidators appointed in Bermuda and made an immediate winding-up order. The court was of the view that Lamtex did not have a credible plan to restructure its debt and was likely using the application in Bermuda as an attempt to engineer a de facto moratorium, which could not be obtained under Hong Kong law. The soft-touch provisional liquidation was described by the court as ‘questionable’.

In Re Ping An Securities Group (Holdings) Ltd,[30] there were two proceedings concerning Ping An Securities. In the earlier proceedings, the court decided to adjourn the winding-up petition presented by the creditor for two months and made an order for recognition and assistance for the soft-touch provisional liquidation of the debtor in Bermuda. Notwithstanding the creditor’s opposition, the court was of the view that since the debtor satisfied the relevant criteria as explained in Re China Huiyuan Juice Group Limited, including the feasibility of restructuring, the petition should be adjourned.

However, in the later proceedings, as the provisional liquidators made no effort to contact the creditor and did not provide the creditor with any information about the progress of the restructuring, the court was of the view that the progress of the matter was entirely unsatisfactory and expressed concerns about the way soft-touch provisional liquidation, generally referred to as the Z-Obee technique,[31] was being used. The court eventually exercised its discretion to order a normal winding-up order.

In both Re Joint Provisional Liquidators of China Bozza Development Holdings Ltd[32] and Re Joint and Several Provisional Liquidators of Victory City International Holdings Ltd,[33] the court was sceptical towards similar uses of soft-touch provisional liquidation. More pertinently, in Re China Bozza, the court only granted an order for recognition as a matter of private international law and, for the first time ever, refused to grant the general assistance that was granted on previous occasions, because the way the joint provisional liquidators had approached the matter had failed to satisfy the court that they were protecting the creditors’ interests.

Scheme of arrangement

A scheme of arrangement in Hong Kong is an effective tool to compromise debts, even those governed by non-Hong Kong law, despite the old common law Gibbs rule.[34]

In Re China Singyes Solar Technologies Holdings Ltd,[35] the Hong Kong court considered an exception to the Gibbs rule and, more generally, the principles of sanctioning a scheme. China Singyes Solar Technologies Holdings Limited (Singyes) is incorporated in Bermuda and listed in Hong Kong.

Singyes proposed a Hong Kong scheme, compromising convertible bonds governed by English law and notes governed by New York law (the Scheme). In considering whether to sanction the Scheme, the court considered whether the Scheme would be effective in the relevant jurisdictions.

The court concluded that the Scheme would be substantially effective in those jurisdictions, even though there was no application to the English and US courts for recognition of the Hong Kong scheme.

It reasoned that although the convertible bonds were governed by English law, there was no need to seek recognition of the Scheme in England. This is because 100 per cent of the holders of the convertible bonds voted in favour of the Scheme, which constituted an exception to the Gibbs rule. In reaching this decision, the court considered the observation in Re OJSC International Bank of Azerbaijan:[36]

[T]here is an exception to the rule if the relevant creditor submits to the foreign insolvency preceding. In that situation, the creditor is taken to have accepted that his contractual rights will be governed by the law of the foreign insolvency proceeding.

Therefore, the Scheme would be effective in England.

The court also accepted that there was no need to seek recognition of the Scheme under US law as more than 99 per cent of the noteholders had acceded to the restructuring support agreement and voted in favour of the Scheme. The court accepted that the risk of adverse enforcement by a dissenting scheme creditor in the United States was de minimis.

Ultimately, the court held that the guiding principle is that the court should not act in vain or make an order that has no substantive effect or will not achieve its purpose. The principle does not require worldwide effectiveness nor worldwide certainty. The court will sanction a scheme provided that it is satisfied that the scheme would achieve a substantial effect.

Although the Gibbs rule will continue to be valid in Hong Kong, this recent case shows that the rule is not a bar for parties to the success of cross-border restructuring.

Hong Kong–mainland China mutual recognition of and assistance in insolvency proceedings

On 14 May 2021, the Record of Meeting was signed.[37] The Cooperation Arrangement highlights the unique role played by Hong Kong under the ‘one country, two systems’ principle, and fosters further legal cooperation in civil and commercial matters between the two jurisdictions.

The framework aims to facilitate the rescue of financially troubled businesses and provides better protection for the assets of the debtor company, as well as the interests of the creditors, and is conducive to the promotion of an orderly and efficient insolvency regime. The framework also covers bankruptcy compromise and reorganisation in mainland China, as well as debt restructuring in Hong Kong, thereby encouraging the use of debt restructuring to revive businesses, with a view to reaching consensus among creditors from both jurisdictions and abroad.

A set of opinions (the Opinion)[38] and a practical guide[39] have been issued by the Supreme People’s Court and the Hong Kong government, respectively. In particular, article 4 of the Opinion is an important piece of guidance that has been frequently referred to by both Hong Kong and mainland China courts, and is fully cited below:

This Opinion applies to Hong Kong Insolvency Proceedings where the HKSAR is the centre of main interests of the debtor.

‘Centre of main interests’ referred to in this Opinion generally means the place of incorporation of the debtor. At the same time, the people’s court shall take into account other factors including the place of principal office, the principal place of business, the place of principal assets etc. of the debtor.

When a Hong Kong Administrator applies for recognition and assistance, the centre of main interests of the debtor shall have been in the HKSAR continuously for at least [six] months.

In addition, article 6 of the Opinion further sets out the procedures to be followed for an application by a Hong Kong liquidator.

Application by Hong Kong liquidators for recognition and assistance in mainland China

In Re Samson Paper Co Ltd,[40] a Hong Kong court, for the very first time, approved the application made by the liquidator of a Hong Kong-incorporated company to issue a letter of request to a mainland China court for recognition and assistance pursuant to the Cooperation Arrangement. Upon receiving the letter of request from the Hong Kong court, the Shenzhen Intermediate People’s Court approved the first-ever application for recognition of and assistance to Hong Kong insolvency proceedings in Yue 03 Ren Gang Po No. 1.[41]

The Shenzhen Intermediate People’s Court agreed with the Hong Kong court’s findings that the company in liquidation’s ‘centre of main interests’ was in Hong Kong on the ground that the company was incorporated in Hong Kong and had been in the paper manufacturing business for 40 years, and the company held most of its assets in Hong Kong (a few industrial flats in Kwun Tong, Hong Kong). Having met the criteria as suggested in article 4 of the Opinion and having complied with the procedures pursuant to article 6 of the Opinion, the Shenzhen Intermediate People’s Court approved this letter of request from the Hong Kong court. This is the first-ever case of a mainland China court formally recognising Hong Kong insolvency proceedings since the signing of the Record of Meeting.

Recently, in Re Ozner Water International Holding Ltd[42] and Re Hong Kong Fresh Water International Group Ltd[43] (a Hong Kong subsidiary of Ozner Water), a Hong Kong court granted two applications to issue a letter of request to a Shenzhen court and a Shanghai court, respectively, despite Ozner Water’s place of incorporation being in the Cayman Islands. In approving the applications, the Hong Kong court found that the companies’ centre of main interests under article 4 of the Opinion remained Hong Kong.

The letters of request are now pending approval from the Shenzhen and Shanghai courts. Further developments are awaited as to whether these courts will recognise the Hong Kong court’s criteria for determining the location of the centre of main interests under article 4 of the Opinion, and whether the Shenzhen court will recognise and assist the insolvency proceedings of a non-Hong Kong-incorporated company.

At the time of writing, there are no reported cases where courts from Shanghai, Xiamen or Shenzhen have sent a letter of request to a Hong Kong court asking for recognition of and assistance in insolvency proceedings.

In view of the increasing need for cross-border insolvency assistance between mainland China and Hong Kong, it is expected that more case law will arise under the Cooperation Arrangement and further clarifications on article 4 of the Opinion will be provided. Given the closer business ties between Hong Kong and cities in mainland China, it remains to be seen whether the Cooperation Arrangement will serve as a useful and practical solution to facilitate more efficient cross-border corporate restructuring actions and expand beyond the three pilot cities to other major cities in mainland China.

* The author would like to express her gratitude to her team at Stevenson, Wong & Co who assisted in the extensive research and contributed to the work of this article, namely senior associate Calvin Huang, trainee solicitors Charles Luk and Leo Choi, and research assistant Samuel Chan.


[4] Previously named the Companies Ordinance.

[7] [2018] 2 HKLRD 449.

[8] [2015] Ch 589.

[9] [2019] HKCA 873.

[10] [2020] HKCFI 311.

[11] [2022] HKCFI 960.

[12] See, for example, Re Z-Obee Holdings Ltd [2018] 1 HKLRD 165.

[13] [2020] 1 HKLRD 676.

[14] id., paragraph 8.

[15] [1910] AC 508.

[16] [2021] HKCFI 2897.

[17] [2023] HKCFI 1340.

[18] [2021] HKCFI 3817.

[19] [2022] HKCFI 1558.

[20] [2023] HKCFI 1350.

[21] [2015] AC 1675.

[22] [2018] HKCFI 277.

[23] id., paragraph 15.

[24] [2019] HKCFI 1738.

[25] [2020] HKCFI 416.

[26] [2006] 2 HKLRD 192.

[27] [2020] HKCFI 825.

[28] For example, see footnote 22.

[29] [2021] HKCFI 622.

[30] [2021] HKCFI 651, [2021] HKCFI 1394.

[31] [2018] 1 HKLRD 165.

[32] [2021] HKCFI 1235.

[33] [2021] HKCFI 1370.

[34] According to this well-established English principle laid down in Antony Gibbs & Sons v La Société Industrielle et Commerciale des Métaux [1890] 25 QBD 399, a foreign composition does not discharge a debt unless it is discharged under the law governing the debt.

[35] [2020] HKCFI 467.

[36] [2018] EWCA Civ 2802; [2019] Bus LR 1130 at [28] (Henderson LJ).

[37] See footnote 2.

[40] [2021] HKCFI 2151.

[41] (2021) 粤03认港破1号.

[42] [2022] HKCFI 363.

[43] [2022] HKCFI 924.

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