Hong Kong’s Inaugural Recognition of Mainland Reorganisation Proceedings: Re HNA Group Co Limited

04 October 2021

In Re HNA Group Co Limited [2021] HKCFI 2897, the Hong Kong Court recognised for the first time reorganisation proceedings commenced under the Mainland Enterprise Bankruptcy Law (“Mainland Reorganisation Proceedings”).

This decision marks the first practical step towards cross-border restructuring cooperation between Hong Kong and the Mainland, and will help the Mainland court’s recognition of Hong Kong schemes of arrangement under The Supreme People’s Court’s Opinion on Taking Forward a Pilot Measure in relation to the Recognition of and Assistance to Insolvency Proceedings in the Hong Kong Special Administrative Region (“Pilot Measure”).

The facts and decision in brief

HNA Group Co Limited (“Company”) was incorporated on the Mainland, an investment holding company, and part of a conglomerate with diverse businesses.

In February 2021, the Hainan court commenced the Mainland Reorganisation Proceedings against the Company, and appointed administrators (“Administrators”) to oversee the Company’s restructuring.

The Administrators needed the Hong Kong Court’s recognition and assistance in order to progress the Company’s restructuring. Accordingly, the Hainan court issued a letter of request to enable the Administrators’ application for recognition and assistance in Hong Kong.

Upon the Administrators’ application, Mr Justice Harris granted the recognition and assistance sought. His Lordship reasoned that the Mainland Reorganisation Proceedings constituted a collective insolvency process and thus were eligible for recognition under Hong Kong’s common law recognition regime.

Further, although Hainan court was not part of the Pilot Measure and might not recognise Hong Kong insolvency proceedings, this would be no bar to the Hong Kong Court granting recognition because Hong Kong’s common law recognition regime is not based on reciprocity.

Commentary

This decision marks another welcome and important development in cross-border insolvency cooperation between Hong Kong and the Mainland.

It also demonstrates the rapid cross-border insolvency cooperation between the two jurisdictions over the past two years:

(a) Just less than two years ago, Mr Justice Harris recognised and assisted Mainland liquidators for the first time (Re CEFC Shanghai International Group Ltd [2020] HKCFI 167; [2020] HKCLC 1).

(b) In May 2020, Mr Justice Harris recognised and assisted Mainland liquidators for the second time (Re Shenzhen Everich Supply Chain Co Ltd [2020] HKCFI 965; [2020] HKCLC 891).

(c) In May 2021, the Pilot Measure came into effect.

(d) In July 2021, Mr Justice Harris used the Pilot Measure to request the Mainland court to recognise and assist Hong Kong liquidators (Re Samson Paper Co Ltd [2021] HKCFI 2151; [2021] HKCLC 1053).

(e) Now Mr Justice Harris has broken new ground again by recognising the Mainland Reorganisation Proceedings.
 

This decision has made it easier for the Mainland courts to recognise Hong Kong schemes of arrangement under the Pilot Measure in future. When that day arrives, it will achieve the most important purpose of the Pilot Measure.

In sum, this pragmatic decision is a big practical step towards Hong Kong/Mainland cross-border restructuring cooperation.

Anson Wong SC and Look-Chan Ho acted for the applicants (the Administrators) in this case.

Look-Chan Ho also acted for the applicants in CEFC, Shenzhen Everich and Samson Paper.

 

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