Milestone In Hong Kong-Mainland China Cross Border Insolvency: Mutual Recognition Of And Assistance To Insolvency Proceedings Between Hong Kong And Mainland China.

On 14 May 2021, Hong Kong’s Secretary for Justice and the Vice-President of the Supreme People’s Court (SPC) signed a record of meeting concerning mutual recognition of and assistance to insolvency proceedings between the courts of Mainland China and Hong Kong (Record of Meeting), which signifies the consensus on the mutual recognition of and assistance to insolvency proceedings between the two jurisdictions in accordance with the principle of reciprocity and with a view to promoting closer cross-border judicial cooperation on insolvency matters.
 

Key Features under the Record of Meeting
 

The key features of the mutual recognition and assistance framework under the Record of Meeting are as follows:
 

1.	The SPC will designate a number of pilot areas where the relevant Intermediate People’s Courts and the Hong Kong Courts will commence work on mutual recognition of and assistance in insolvency proceedings. The SPC has initially designated Shanghai, Xiamen and Shenzhen as pilot cities to take forward the pilot measures.
2.	A liquidator or a provisional liquidator in Hong Kong insolvency proceedings may apply to the relevant PRC court for:   a.  Recognition of compulsory winding up, creditors’ voluntary winding up and corporate debt restructuring proceedings; b.  Recognition of his office as a liquidator or provisional liquidator; and c.  Grant of assistance for discharge of his duties as a liquidator or provisional liquidator.
3.	Similarly, an administrator in PRC bankruptcy proceedings may apply to the Hong Kong High Court for:   a.  Recognition of bankruptcy liquidation, reorganisation and compromise proceedings under the PRC Enterprise Bankruptcy Law; b.  Recognition of his office as an administrator; and c.  Grant of assistance for discharge of his duties as an administrator.
4.	Pursuant to the Record of Meeting, the SPC and the Hong Kong Government have respectively issued a guiding opinion (Guiding Opinion) and a practical guide (Practical Guide) in relation to the mutual recognition of and assistance to insolvency proceedings. Amongst other matters, the Guiding Opinion and the Practical Guide set out further details in relation to the application requirements and procedures for recognition and assistance in the two jurisdictions.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comments
 

Whilst the Hong Kong Courts haveHongHH increasingly been willing to recognise PRC appointed administrators, there has yet to be a case in which a PRC Court has granted formal recognition of a foreign liquidator (as noted by the Honourable Mr. Justice Harris in his recent judgment in Re Ando Credit Limited [2020] HKCFI 2775). The Record of Meeting is therefore a welcome development in the Hong Kong-Mainland China cross-border insolvency arena. In view of the increasing number of cross-border insolvency matters finding their way into the Hong Kong Courts, and increasing economic co-operation between Hong Kong and the Greater Bay Area over the border, we anticipate that insolvency practitioners in both jurisdictions will be able to utilise this mutual recognition and assistance framework to facilitate cross-border insolvency work, and will be able to achieve savings of costs and consistency of treatment of creditors in the two jurisdictions as a result.
 

 

For further information, please contact:

 

Richard Hudson, Partner, Deacons

richard.hudson@deacons.com.hk