The Hong Kong Court of First Instance recognised the reorgansation proceedings of a company based in the PRC for the first time in Hong Kong in Re HNA Group Co Limited  HKCFI 2897.
HNA Group Co., (“HNA Group”) is a well-known and substantial business group based in Hainan, PRC. HNA Group developed very serious financial issues in the past few years, which led to an application to the Hainan Province Higher People’s Court (“the Hainan Court”) for bankruptcy reorganization of the Company on the grounds of insolvency. The Hainan Court ordered the commencement of reorganization and appointed HNA Group’s Administrator in February 2021.
The Administrator subsequently applied to the Hainan Court for a letter of request directed to the Hong Kong High Court seeking recognition of the reorganisation in the PRC and providing powers of assistance to particular representatives of the Administrator in Hong Kong. The three representatives of the Administrator, which were the applicants in this case, then sought an order in Hong Kong recognizing the reorganization of HNA Group.
Mr. Justice Harris found that the following standard two-fold test in determining whether a Hong Kong Court may grant a recognition and assistance order was satisfied in this case:-
(1) Whether the process in the PRC constitutes a“collective insolvency process” in Hong Kong
The reorganization is clearly properly characterized as a collective insolvency procedure because:-
- The reorganization process in the PRC deals with reorganization and is intended to restructure debt and rehabilitate a company’s business and avoid liquidation.
- If the reorganization plan approved by the PRC Court cannot be implemented, HNA Group will be declared bankrupt; and
- This process concerns all of HNA Group’s creditors.
(2)Whether the foreign insolvency proceedings were opened in the Company’s country of incorporation or where it has its centre of main interests
This was uncontroversial as the Company is incorporated in the PRC.
In light of the above, Mr. Justice Harris granted an Order to provide recognition and assistance to the PRC reorganization process.
It is worth noting that as reciprocity is not a requirement of common law recognition and assistance in Hong Kong, this recognition order was granted although Hainan is not part of the procedure for mutual recognition and assistance in insolvency proceedings between three Intermediate People’s Courts in the Mainland and Hong Kong, the topic of which we have previously covered in our previous article.
This recognition order, on top of the said procedure for mutual recognition and assistance in insolvency proceedings, is a significant step in cross-border insolvency cooperation between the PRC and Hong Kong. It is likely that companies and/or their administrator(s) embroiled in insolvency proceedings in either the PRC or Hong Kong will gradually find it easier to exercise their powers and manage their cases in either jurisdiction. Coupled with other developments that integrate cross-border insolvency practice between Hong Kong and the PRC, this case is a further step in securing Hong Kong’s role as a preferred venue for Chinese enterprises to base their entities, particularly where the decision is driven by investors.
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