Permission granted to provisional liquidators to seek Mainland recognition

Permission granted to provisional liquidators to seek Mainland recognition

Permission granted to provisional liquidators to seek Mainland recognition 1401 788 Charing

The recent decision by the Hong Kong Courts in Re Ando Credit Ltd [2020] HKCFI 2775 represents a step in the right direction in judicial cooperation over cross-border insolvency between Hong Kong and the Mainland.

A crucial aspect in cross-border insolvency proceedings is the mutual recognition of the winding-up order and execution of the same to allow liquidators to reach assets in other jurisdictions in satisfaction of the Company’s debts.

The application in Re Ando is the first of its kind.  In Re Ando, the applicant made an ex parte application for the appointment of provisional liquidators over a company incorporated in Hong Kong with the express purpose of seeking recognition of the Hong Kong provisional liquidators in the Mainland so that the Hong Kong liquidator could recover the very substantial receivables believed to be owed to the Company by its debtors in the Mainland.

The Court granted an order appointing the provisional liquidators with an express provision permitting the provisional liquidators to make an application for recognition by the Shenzhen Bankruptcy Court.

Despite acknowledging that there has not yet been a case in which a court in the Mainland has granted formal recognition of a foreign liquidator, Harris J went on and commented that there is an anticipation that a protocol will be entered into between Hong Kong and the Mainland which would provide for such mutual recognition.

In delivering his judgment, the learned Judge appended to the decision an article written by three judges in the Shenzhen Bankruptcy Court, discussing recognition by Hong Kong of Mainland-appointed liquidators and prospective recognition of Hong Kong liquidators appointed over Hong Kong incorporated companies in the Mainland.

The article referenced by Harris J discusses the cases of Shenzhen Nianfu Supply Chain Co. Ltd, Guangdong International Trust and Investment Company and the Shanghai Huaxin International Group Co., Ltd, where Hong Kong Courts recognised and assisted Mainland insolvency proceedings.  These cases have shown an open attitude towards recognition and assistance to Mainland Insolvency proceedings, which provides a basis for the Mainland courts to hear applications for recognition and assistance from Hong Kong liquidators on the principle of reciprocity.

It remains to be seen whether the provisional liquidators in Re Ando will be recognised by the Shenzhen Bankruptcy Court.  The continued trend of increasing mutual recognition and assistance by the courts of the two jurisdictions should bode well for easier cross-border judicial cooperation on insolvency matters across the border.

Contact us today if you would like to find out more about cross-border enforcement between Hong Kong and the Mainland in civil cases.

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