Under the new Cooperation Mechanism between Hong Kong and the Mainland for insolvency proceedings, our firm successfully obtained recognition and assistance from Hong Kong courts for a PRC Administrator


Case summary

Guangdong Overseas Construction Corporation (“Company”) was established in the Mainland on 30 November 1992. By a judgement dated 20 April 2016, the Company was adjudged by the Tianhe District Court in Guangzhou as being liable to pay RMB2,746,320 together with interest to a creditor. As such, the creditor applied for bankruptcy against the Company under the Enterprise Bankruptcy Law, which was accepted by the Guangzhou Intermediate People’s Court (“Guangzhou Court”) on 24 April 2020.

On 21 March 2021, the Guangzhou Court appointed Guangzhou Jin Gu Corporate Insolvency Ltd. (廣州金股企業清算有限公司) as administrator of the bankruptcy proceedings (“Administrator”).  In order to facilitate the performance of the Administrator’s duties, a letter of request was issued by the Guangzhou Court to the Hong Kong Court of First Instance requesting the recognition of the Administrator’s status.

Our firm, Ling & Lawyers (the “Firm”), was instructed by the Administrator in making the application for the recognition and assistance of Hong Kong Courts in the said bankruptcy proceedings with regard to the Company’s assets located within the jurisdiction.

The High Court ultimately made an order recognizing the Administrator’s status in Hong Kong. This decision was the first in which an application for recognition made by a Mainland court was granted by a court in Hong Kong since the signing of the Record of Meeting between the Supreme People’s Court (SPC) and the Hong Kong Government on the Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Mainland and Hong Kong courts (“Record of Meeting”).

Decision of the Hong Kong High Court

Although the laws relating to cross-border insolvency proceedings have yet to be codified, Hong Kong courts have traditionally relied on common law principles in dealing with the recognition and assistance of foreign office-holders in winding up proceedings. In the present case, the Court found that the Administrator had satisfied the requirements as set out in Re Global Brands Group Holding Ltd (in liq) [2022] 3 HKLRD 316 and Singularis Holdings Ltd v PricewaterhouseCoopers [2015] AC 1675:

  1. The foreign insolvency proceedings are collective insolvency proceedings which include proceedings opened in a civil law jurisdiction;
  2. The foreign insolvency proceedings are conducted in the jurisdiction in which the company’s centre of main interest is located;
  3. The assistance is both necessary to the performance of the office-holders functions in the administration of a foreign winding up, and consistent with the substantive law and public policy of the Hong Kong courts as the assisting court.

In light of this, the pertinent question for the High Court was whether a court, though not included within the Pilot Areas of the Cooperation Mechanism, may nonetheless initiate a request for assistance to the Hong Kong court.

Accepting the views of Harris J in Re HNA Group Co., Ltd [2021] HKCFI 2897, the Court agreed that reciprocity was not a requirement for recognition and assistance under common law, and that it was for the SPC to decide whether courts outside the Pilot Areas may apply for recognition and assistance. In other words, foreign courts may be granted recognition and assistance once the above mentioned common law requirements were satisfied – regardless of whether it comes within the scope of the Record of Meeting.

In finding that common law requirements were satisfied, the Court made an order recognising that the Administrator had and may exercise in Hong Kong certain powers as administrator of the Company.

Our client, as the Administrator, was successful in obtaining its desired outcome in the present insolvency proceedings.

Conclusion & Future Prospects

With the increasing socio-economic proximity between Hong Kong and the Mainland, the laws in relation to cross-border matters in both jurisdictions have likewise undergone various stages of change and adjustment. Given that the crux and substance of foreign insolvency proceedings lie in ability to recognize and enforce such proceedings against a debtor’s assets within the jurisdiction, the new arrangement between Hong Kong and the Mainland is, without doubt, an important safeguard for cross-border trade and economic development. Though mechanisms for cross-border cooperation at present are still nascent, implementation of the Record of Meeting is an important step in realizing a holistic cross-border legal apparatus.