Re Ping An Securities Group (Holdings) Ltd (平安證券集團(控股)有限公司)

Harris J
5, 12 March 2021

Facts

Y, a holder of a bond issued by C, petitioned in Hong Kong to wind up C, a Bermuda-incorporated company listed on the Main Board of the Stock Exchange of Hong Kong Ltd, on the grounds of insolvency. Subsequently, the joint provisional liquidators (JPLs) who were appointed as soft-touch provisional liquidators in Bermuda applied for recognition and assistance in Hong Kong, and sought an adjournment of two months to progress a restructuring of C. Y argued that: (i) the recent decisions in which a soft-touch provisional liquidation was recognised and assisted in Hong Kong was an impermissible use of the court’s common law power of recognition and assistance; (ii) the soft-touch provisional liquidation should not be recognised because it was not a collective insolvency process which was necessary before the court’s powers of recognition and assistance could be deployed; (iii) to adjourn the petition to allow C the opportunity to progress a restructuring was inconsistent with the Rule in Gibbs, which provided that a debt could only be compromised in accordance with the law that governed it; (iv) the soft-touch provisional liquidation was an improper attempt to stifle enforcement of the debt; and (v) if the Court took the view that the proceedings in Bermuda should be recognised, they should be treated as an ancillary process rather than the main one.

Held, adjourning the petition and making an order for recognition and assistance, that:

  1. There was nothing objectionable in principle to the court recognising and assisting a foreign soft-touch provisional liquidator. Whilst it was not necessary to determine what the necessary characteristics of a collective insolvency process was and whether they were present in the present case, a central feature would be a process intended to regulate the rights of creditors or a class of creditors of a company, which was insolvent or seriously financially distressed, and was not limited to a conventional liquidation (Joint Administrators of African Minerals Ltd v Madison Pacific Trust Ltd [2015] 4 HKC 215, Re China Solar Energy Holdings Ltd (No 2) [2018] 2 HKLRD 338, Re Joint Provisional Liquidators of Hsin Chong Group Holdings Ltd (HCMP 313/2019, [2019] HKEC 945), Re Moody Technology Holdings Ltd [2020] 2 HKLRD 187, Re FDG Electric Vehicles Ltd [2020] 5 HKLRD 701, Re Lamtex Holdings Ltd applied; Re Legend International Resorts Ltd [2006] 2 HKLRD 192, Singularis Holdings Ltd v PricewaterhouseCoopers [2015] AC 1675 distinguished).
  2. C’s attempts to have the JPLs’ appointment in Bermuda recognised and the petition adjourned was consistent with the Rule in Gibbs. The proposal was a process that would lead to all unsecured debts being compromised by a Hong Kong scheme of arrangement, which was no different from what was commonly proposed by Hong Kong companies seeking time to restructure. As Y’s debt was governed by Hong Kong law, a Hong Kong scheme would be effective to compromise it (Antony Gibbs & Sons v Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399 considered).
  3. Y was seeking to invoke a class remedy. The relevant issue was what order the Court should make to best achieve a result that was likely to be beneficial to the class. If the Court was satisfied that the best course was to adjourn the petition to allow a scheme of arrangement to be introduced, which would compromise all unsecured debt, it was entirely consistent with the character and purpose of the insolvency process to do so.
  4. Primacy was not automatically to be given to soft-touch provisional liquidation in the place of incorporation. If a petition had already been issued in Hong Kong, and the petitioner and such other creditors as supported it did not agree to an adjournment, the company was still required to satisfy the criteria by reference to which the Hong Kong court assessed applications on similar grounds by companies incorporated in Hong Kong. If the company could not do so, it would be wound up and an application for recognition of the soft-touch provisional liquidation would not be granted
  5. C had in the circumstances satisfied the relevant criteria for having the petition adjourned for approximately two months rather than C immediately wound up (Re China Huiyuan Juice Group Ltd [2021] 1 HKLRD 255 applied).

Applications

This was the petitioner’s application to wind up the subject company and the foreign joint provisional liquidators’ application for an order for recognition and assistance.

Jurisdictions