Jan 2025
On 23 October 2024, Deputy High Court Judge Le Pichon of the Court of First Instance in the High Court of the Hong Kong SAR granted recognition and assistance to Chan Ho Yin (also known as Michael Chan) (“Mr Chan“) of Kroll (HK) Ltd and Elaine Hanrahan (“Ms Hanrahan“), the joint official liquidators of Bull’s-Eye Limited (“Bull’s-Eye”) following a letter of request issued by the British Virgin Islands (“BVI”) Eastern Caribbean Supreme Court.
The decision sets out the Hong Kong Court’s latest position on recognising foreign liquidators appointed in a company’s place of incorporation whilst the company’s centre of main interests is in Hong Kong, and the scope of assistance the Hong Kong Court is willing to grant.
Background
Bull’s-Eye is a company incorporated under the laws of the BVI. Bull’s-Eye holds 29.77% of the issued share capital of Hua Han Health Industry Holdings Limited (“Hua Han”), a Cayman Islands company whose shares were previously traded on the Main Board of the Hong Kong Stock Exchange (Stock Code: 587). On 18 July 2019, Hua Han was put into provisional liquidation by an order of the Hong Kong Court, and on 2 December 2019 the Hong Kong Court made a winding-up order against Hua Han.
On 15 August 2022, the Hong Kong Court ordered Bull’s-Eye to pay Hua Han and its wholly-owned subsidiaries, including Intended Features Limited (in Official Liquidation) (“IFL”), a sum of HK$713 million which was found to be misappropriated from these entities and knowingly received by Bull’s-Eye (the “Hong Kong Order”).
BVI Winding-up Proceedings and Letter of Request
During the recovery process, it was discovered that Bull’s-Eye was dissolved and on 23 August 2023, the joint liquidators of IFL instructed Conyers to make an application to restore Bull’s-Eye to the Register of Companies. A restoration order was subsequently granted on 1 September 2023. On 29 November 2023, the joint liquidators of IFL instructed Conyers to make an application to the BVI Court for the appointment of liquidators over Bull’s-Eye. On 15 January 2024, Conyers successfully obtained an order from the BVI Court appointing Mr. Chan and Ms. Hanrahan as the joint official liquidators of Bull’s-Eye (the “JLs”).
Although Bull’s-Eye was incorporated in the BVI, it holds valuable assets in Hong Kong, namely, cash in nine bank accounts including with Haitong International Securities Limited and Changjiang Securities Brokerage (HK) Limited. These assets are subject to restrictive notices issued by the Hong Kong Securities and Futures Commission.
In order to realise Bull’s-Eye’s Hong Kong assets, on 24 July 2024, Conyers acting for Mr. Chan and Ms. Hanrahan (in their capacity as joint liquidators of Bull’s-Eye) made an application to the BVI Court for a letter of request to be issued to the High Court of the Hong Kong SAR, requesting that the JLs be granted recognition and assistance in Hong Kong. On 26 July 2024, the BVI Court granted an order for a letter of request to be issued to the High Court of the Hong Kong SAR.
Recognition and assistance of the JLs’ appointment was necessary to allow the JLs to deal with the restrictive notices and to realise Bull’s-Eye’s Hong Kong assets. On 30 September 2024, the joint liquidators of Bull’s-Eye made an application to the Hong Kong Court seeking its recognition of Bull’s-Eye’s insolvent liquidation and the JLs’ appointment by the BVI Court.
The Hong Kong Recognition Proceedings Decision
Deputy High Court Judge Le Pichon heard the application for recognition and assistance and noted that the Hong Kong Court will recognise foreign insolvency proceedings if (1) the foreign insolvency proceedings are collective insolvency proceedings; and (2) the foreign insolvency proceedings are opened in the jurisdiction in which the company’s centre of main interests is located.
Where (2) does not apply, but the foreign insolvency proceedings are taking place in the jurisdiction of incorporation, the Hong Kong Court may grant recognition and assistance if either it is limited to recognition of a liquidator’s authority to represent a company and orders that are incidental to that authority which might be described as “managerial assistance”, or a liquidator requires limited and carefully prescribed assistance as a matter of practicality: Re Global Brands at §50.
Limited recognition and assistance may also be granted in cases that do not fall within “managerial assistance” where, for practical reasons, it is necessary and the foreign insolvency process is in the place of incorporation. Deputy High Court Le Pichon J stated that where officeholders are appointed in a jurisdiction’s place of incorporation, “[s]o long as the interests of the forum are not adversely affected by a foreign order, the court should lean towards recognition” (paragraph 25 of DCHJ Le Pichon’s Decision).
The Hong Kong Court’s standard form recognition order empowers foreign liquidators, inter alia, (i) to locate, protect, secure and take into their possession and control all assets and property to which the company is or appears to be entitled; (ii) so far as may be necessary to supplement and to effect the powers set out therein, bring legal proceedings and make all such applications to the court; (iii) to request and receive information concerning the company; operate and open and close any bank accounts in the name of and on behalf of the company; and to retain and employ agents and professional persons for the purpose of advising or assisting in the execution of the powers duties.
The Hong Kong Court observed that where there are assets in Hong Kong, a recognition order would enable a foreign insolvency officeholder to take possession of or deal with such assets. The Hong Kong Court ultimately held that recognition of the JLs’ status was necessary to enable them to take possession of the assets in the nine accounts maintained by Bull’s-Eye and any other assets located in Hong Kong in order to realise them for distribution.
Le Pichon DHCJ held she had “no doubt the requirements for recognition and assistance are satisfied” and recognition of the JLs was therefore granted.
The creditors of Bull’s-Eye and, by extension, Hua Han and its wholly-owned subsidiaries, will benefit greatly from the Hong Kong Court’s decision. The Hong Kong Court’s judgment is a testament to the benefits of judicial comity between the British Virgin Islands and Hong Kong.
The Hong Kong Court’s judgment can be viewed here.