The Facts – Shortly Stated
Re Guangdong Overseas Construction Corporation  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)  1 HKLRD 676 (Harris J) and Re Shenzhen Everich Supply Chain Co., Ltd (in liq)  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:-
- （1） In respect of an application for recognition and assistance made by a Mainland court, the request has to be initiated by a court in the pilot areas designated by the SPC (“Pilot Areas”) (§1). Although §3 of the Record of Meeting refers to an application made by a Mainland administrator to the Hong Kong court for recognition and assistance, it has to be read in the context that the Cooperation Mechanism is for mutual recognition and assistance between the courts of the Mainland and Hong Kong as stated in the first paragraph of the Record of Meeting.
- （2） Similarly, an application made by a liquidator appointed by the Hong Kong court for recognition and assistance has to be made to a court in the Pilot Areas (§2).
- （3） The Practical Guide and the SPC’s Opinion prescribe the framework of mutual recognition and assistance of insolvency proceedings between the courts of the Mainland and of Hong Kong and inform the practitioners on the manner in which an application is to be made to the relevant court. They do not purport to confer jurisdiction on the relevant court to seek recognition and assistance. The jurisdiction is to be found in existing laws. As far as Hong Kong court is concerned, the jurisdiction to recognize and assist office-holder appointed by a court of another jurisdiction is to be found in common law.
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:-
- （1） The power at common law to recognize and assist foreign office-holder does not depend on winding up proceedings having been commenced against the company in the assisting court, as the court is asked to recognize the office-holder appointed in the place of incorporation as the lawful agent in accordance with principle of private international law;
- （2） The applicant has to satisfy the court that:
- (a) the foreign insolvency proceedings are collective insolvency proceedings which include proceedings opened in a civil law jurisdiction;
- (b) the foreign insolvency proceedings are conducted in the jurisdiction in which the company’s centre of main interest is located; and
- (c) the assistance is necessary for the administration of a foreign winding up or the performance of the office-holder’s functions, and the order is consistent with the substantive law and public policy of the assisting court so it is not available for purposes which are properly the subject of other schemes.
- （3） As to the extent and terms of assistance to be provided to the office-holder, the authorities show that the court has granted assistance to a foreign office-holder (a) to take control of the assets of the company; (b) to stay the local proceedings against the assets of the company; and (c) to obtain and gather information and documents relating to the company from third parties.