C, a company incorporated in Hong Kong, was wound up by its shareholders in Hong Kong on the grounds of insolvency. In order to deal with C’s assets located in Shenzhen, its liquidators (Ls) applied to the Court for the issuance of a letter of request to the Bankruptcy Court of the Shenzhen Intermediate People’s Court requesting that an order be made recognising Ls and providing assistance to them. The application was made pursuant to a new procedure for the mutual recognition of insolvency processes and office holders between the High Court of Hong Kong and the Intermediate People’s Courts in Shenzhen, Shanghai and Xiamen (the Cooperation Mechanism). The Cooperation Mechanism consisted of two documents: the “Record of Meeting of the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region and Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Court of the Mainland and the Hong Kong Special Administrative Region”; and the Supreme People’s Court’s “Opinion on taking forward a pilot measure in relation to Recognition and Assistance to Bankruptcy (Insolvency) Proceedings in the Hong Kong Special Administrative Region” (the SPC Opinion). According to art.6 of the SPC Opinion, in order for an application by Hong Kong liquidators for recognition and assistance to be granted under the Cooperation Mechanism, it was necessary for the Hong Kong Court to provide a letter of request and a judgment determining that a letter of request should be issued.
Held, ordering a letter of request to be issued to the Shenzhen Intermediate People’s Court (in the form appended to the judgment), that:
- According to art.4 of the SPC Opinion, a Hong Kong liquidator could only apply for recognition and assistance where the centre of main interests of the debtor company had been in Hong Kong continuously for at least six months. Here, C was incorporated in Hong Kong so it followed that the SPC Opinion applied and this was a proper case in which to seek recognition and assistance, unless there were matters which demonstrated its centre of main interests was located elsewhere. On the evidence, C’s centre of main interests had remained in Hong Kong since its incorporation as it had always been run out of Hong Kong (Melars Group Ltd (in liquidation) v East-West Logistics LLP  EWHC 1523 (Ch) considered).
Principles for granting a letter of request
- The Court had the inherent jurisdiction to grant a letter of request in order to permit Hong Kong liquidators to seek recognition and assistance in another jurisdiction. In considering whether to grant a letter of request, the Court had to consider which jurisdiction was the most appropriate or convenient forum for determining the issue in question applying generally applicable jurisdictional principles. Here, it was appropriate to grant a letter of request. The assistance Ls needed related to conventional asset collection action; they had an express statutory power under Hong Kong law to commence legal proceedings to recover assets; and this power extended to commencing proceedings outside Hong Kong (Akira Sugiyama v Kosei Securities Co (Asia) Ltd  1 HKC 261, Re Southern Pacific Personal Loans Ltd  Ch 426, Re China Agrotech Holdings Ltd  HKCLC 365 applied).
Appropriate entity to which letter of request to be directed
- As the Bankruptcy Court was an administrative section of the Shenzhen Court rather than a separate entity, it was more appropriate to direct the letter of request simply to the Shenzhen Intermediate People’s Court.
This was an application by the liquidators of a company incorporated in Hong Kong for the issuance of a letter of request to the Bankruptcy Court of the Shenzhen Intermediate People’s Court seeking recognition and assistance.
Editorial Note: This is the first time that the Hong Kong Court has issued a letter of request to a Mainland Court requesting an order for recognition of and assistance to Hong Kong liquidators pursuant to the new “Cooperation Mechanism” referred to in the judgment.