17 May 2023
The Facts – Shortly Stated
Re Guangdong Overseas Construction Corporation [2023] HKCFI 1340 (17 May 2023) involved a relatively rare application in which an administrator (“Administrator”) appointed by the Guangzhou Intermediate People’s Court of Guangdong Province (廣東省廣州市中級人民法院) over a Mainland company sought recognition and assistance from the Hong Kong Court. This follows from the recent decisions of Re CEFC Shanghai International Group Ltd (in liq) [2020] 1 HKLRD 676 (Harris J) and Re Shenzhen Everich Supply Chain Co., Ltd (in liq) [2020] HKCFI 965.
It is of note at the outset that this application was not made pursuant to the consensus in relation to mutual recognition of and assistance to insolvency proceedings between the courts of the Mainland and of Hong Kong (“Cooperation Mechanism”), as the Guangzhou Court does not belong to one of the specified pilot areas. Nevertheless, the Honourable Madam Justice Linda Chan provided useful guidance on the understanding and relevance of the Cooperation Mechanism in circumstances where an application is brought outside its scope.
Applying the principles summarized below, the Court granted an Order as set out at §24 of the judgment, accepting that (1) the extant insolvency proceeding amounts to a collective insolvency proceeding; (2) the insolvency proceeding is conducted in the Mainland, which is both the place of incorporation of the Company and its centre of main interest; (3) the assistance sought is necessary for the administration of the Company and the performance of the Administrator’s functions given the Company’s valuable asset in Hong Kong, as to which the Administrator is duty-bound to take control; and that (4) the Order as granted is in line with the substantive law and public policy of the court.
Takeaway 1: “Standard Form” Order
At the outset, the Hong Kong Companies Court reiterates that while orders have been granted in the past in similar terms, this does not obviate the need to have particular regard to the precise circumstances of the liquidation and to “formulate the terms of order which suit the company in question”. In the instant case, since specific assets had been identified for the purposes of seeking control, it was necessary that the order be formulated in sufficiently certain and effective terms having regard to that particular objective. This required setting out the details of the assets in question.
Takeaway 2: Proper understanding and relevance of the Cooperation Mechanism
Whilst, as mentioned above, this was not an application under the Cooperation Mechanism, her Ladyship provided the following useful guidance on its operation and understanding:-
Moreover, notwithstanding that an application may fall outside the scope of the Cooperation Mechanism, her Ladyship considers that “as a matter of practice and to ensure consistency in which the application is made”, future applications should still be prepared in adherence to the Practical Guide.
In other words, even though a letter of request may be issued by a court outside the designated pilot areas under the Cooperation Mechanism, whilst this does not preclude the Hong Kong Court’s exercise of its common law jurisdiction to provide assistance, the applicant should still follow the Practical Guide for consistency and practicality.
Takeaway 3: Approach of Hong Kong Court to recognition/assistance applications
Her Ladyship then went on to summarise the Hong Kong Court’s approach when faced with an application for recognition/assistance by a foreign office-holder as follows:-
This case highlight was authored by José-Antonio Maurellet, SC and Michael Lok.
