On 14 May 2021, Hong Kong’s Secretary for Justice, Ms. Teresa Cheng, SC, and Mainland China’s Vice-President of the Supreme People’s Court (“SPC”), Mr. Yang Wanming, signed a record of meeting in Shenzhen concerning mutual recognition of and assistance in insolvency proceedings between the courts of the Mainland and the Hong Kong Special Administrative Region (“HKSAR”).
Ms. Cheng said that the record of meeting signified the consensus on the mutual recognition of and assistance in insolvency proceedings between the two jurisdictions. Liquidators from Hong Kong may apply to Mainland courts for recognition of insolvency proceedings in Hong Kong. Likewise, bankruptcy administrators from the Mainland may apply to the High Court in Hong Kong for recognition of bankruptcy proceedings in the Mainland. The framework facilitates the rescue of financially-troubled businesses, and provides better protection for the assets of the debtor company as well as the interests of creditors. The framework is hence conducive to the promotion of an orderly and efficient insolvency regime.
The new co-operative framework expressly covers bankruptcy compromise and reorganisation in the Mainland as well as debt restructuring in Hong Kong, thereby encouraging the use of restructuring of debts to revive businesses with a view to reaching consensus among creditors from both places and abroad. This may open up more opportunities for the debtor company to look for a successful rescue. In the long run, the framework will give additional assurance to investors and further improve the business environment in the Mainland and Hong Kong.
The key features of the record of meeting include: the SPC will designate a number of pilot areas where the relevant Intermediate People’s Courts and HKSAR courts will commence the work on mutual recognition of and assistance in insolvency proceedings in accordance with the laws. A set of opinions and a practical guide will be issued respectively by the SPC and the HKSAR Government in respect of their relevant work on the matter.
The new arrangement will apply first to Shanghai, Xiamen and Shenzhen as pilot cities given their close trade ties with Hong Kong, as the three cities are also the popular choices for investments from Hong Kong. There are plans to progressively expand the scope of the pilot areas.
A copy of the record of meeting is available on the Department of Justice website.
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