A. Introduction
In the recent judgment, Re Jingrui Holdings Ltd [2026] HKCFI 246, Harris J made a winding-up order against an unregistered foreign company incorporated in the Cayman Islands, of which the assets are located in Mainland China.
In this Judgment, the Court confirmed the following principles: –
(1) The Court will wind-up a foreign company only if doing so has a real possibility of benefitting the creditors. The Court will assess such benefit in a practical and commercial way.
(2) In insolvency proceedings, debtors can rely on an arbitration clause, only if they show a genuine intention to arbitrate. Whilst failing to take steps to arbitrate before a petition is not fatal to such reliance, the later such steps were taken, the harder it becomes to prove a genuine intention.
B. Factual Background
The petitioning creditor relied on a loan previously made to a wholly-owned subsidiary of Jingrui Holdings Limited (Company). The debt was guaranteed by the Company under a Deed of Guarantee, which was later affirmed in a Deed of Confirmation. The Company failed to repay the debt upon a statutory demand being served on it.
The Company resisted the winding-up petition on two bases:
(1) The Company is a foreign company and the “three core requirements” for a Hong Kong Court to make a winding-up order against a foreign company were not satisfied. (Jurisdiction Defence); and
(2) The guarantee under which the debt was said to arise contained an arbitration clause and the dispute over the debt should be decided by arbitration. (Arbitration Clause Defence).
C. Jurisdiction Defence
The Court reaffirmed the three core requirements in Kam Leung Siu Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501 which must be met for it to exercise winding-up jurisdiction over a foreign company:
(1) There is sufficient connection between the Company and Hong Kong, which does not necessarily mean there has to be assets within Hong Kong, but also depends on a range of factors;
(2) There is a real possibility that a winding-up order would benefit those applying for it; and
(3) The Court is able to exercise jurisdiction over somebody interested in the distribution of the Company’s assets other than the Petitioner.
The central issue in this case concerned the second requirement. Harris J referred to Re Up Energy Development Group Ltd (In Liquidation) [2025] HKCA 555, emphasising that the Court must assess the second requirement in a “practical and commercial way”. The second requirement would be satisfied “so long as the benefit can be said to be a real possibility, rather than a merely theoretical one”.
In this case, it was not disputed that the Company’s major operating and asset owning subsidiaries are in Mainland China. Expert evidence on PRC law was adduced on whether liquidators appointed in Hong Kong liquidations can apply for recognition in Mainland China under the pilot scheme on mutual recognition of and assistance to insolvency proceedings (Pilot Scheme). In gist, recognition under the Pilot Scheme depends on whether the PRC Court is satisfied that the centre of main interests (COMI) of the Company is in Hong Kong.
Although there was no previous case of a Hong Kong liquidator appointed over a foreign company being recognised by a Mainland court, Harris J affirmed that the Pilot Scheme’s purpose is to “recognise and assist each other’s processes”. With this intention in mind, the Court does “not go looking for problems, although they will be encountered”. The Court said that it was clearly arguable that the COMI of a Hong Kong listed company (as opposed to its subsidiaries) is in Hong Kong, making Mainland recognition possible. Mainland recognition and the ability to seek to gather assets in Mainland China are potentially significant benefits to the Petitioner and other unsecured creditors, the Court said, and the second core requirement was satisfied by such prospect in this case.
D. Arbitration Clause Defence
Whether the Company can rely on the Arbitration Clause Defence depends on two questions: –
(1) Whether the debtor has a genuine intention to arbitrate; and
(2) If there is a genuine intention to arbitrate, has the defence been shown to be frivolous and thus, despite the presence of an arbitration clause, the Court should nevertheless determine the winding-up petition.
Harris J referred to his recent decision in Re a Debtor, Xu Peixin [2025] HKCFI 5846, which summarised the relevant principles. In short, it is possible for a debtor to have an intention to arbitrate, despite failing to express such intention before a petition is presented. However, the later a debtor expresses such intention, the weaker the argument that a debtor has a genuine intention to arbitrate. This is particularly the case, if the debtor does not take active steps to commence arbitration and advances no reason for the failure to do so.
In this case, the Court found there to be no genuine intention to arbitrate. As at the date of the petition being heard, nothing had been done to commence arbitration and the Company failed to advance a good reason as to why no such steps had been taken. The facts of this case were so weak, the Court said, that “to find a genuine intention to arbitrate on the facts of this case would rob the test of substance”.
Even if there was a genuine intention to arbitrate, the Company’s defence that the execution of the guarantee was defective was simply devoid of merit. Contemporaneous evidence supported the fact that the guarantee was enforceable. The Company had therefore failed to demonstrate a substantive defence.
E. Concluding Remarks
This case adds to the line of authorities after Re Guy Lam [2023] HKCFA 9 that sought to clarify the relationship between insolvency proceedings and arbitration clauses, with a particular focus on the meaning of a genuine intention to arbitrate. It also serves as a helpful reminder of the Court’s pragmatic approach in finding whether a winding-up order could benefit the creditors, and sheds light on how the Pilot Scheme could potentially assist creditors in satisfying such requirement.
Click here for the full judgment.
F. Further Development
(a) The Dynamics Between Anti-suit Injunctions and Arbitration Clauses
This is perhaps also a good opportunity to briefly address other developments on how the principle in Re Guy Lam interacts with contemporary practices and principles in winding-up proceedings.
Hyalroute Communication Group Ltd v Industrial and Commercial Bank of China (Asia) Limited [2025] HKCFI 2417 is another interesting case currently pending appeal in the Court of Appeal. This is the first case where the Hong Kong Court decided whether to grant an anti-suit injunction to restrain a winding-up petition in the Cayman Islands in favour of a Hong Kong arbitration.
There were two key findings in the Court of First Instance. First, the Court held that whether an anti-suit injunction should be granted depends on the proper construction of the arbitration clause. The clause in Hyalroute was the standard HKIAC clause, providing that all disputes arising out of the contract should be “finally resolved” by arbitration. The Court was of the view that a winding-up petition under Cayman law does not resolve the substantive dispute between the petitioner and the creditor, thus cannot be said to be “finally resolving” the subject dispute. Therefore, bringing a Cayman winding-up petition will not breach the arbitration clause. Second, the Court further commented that the underlying merits of the company’s defence were “hopeless and frivolous”. Under the approach affirmed in Re Guy Lam, the Court will refuse to dismiss or stay a winding-up petition if the company’s defence borders on the frivolous or abuse of process. Extending this approach to anti-suit injunction applications, this application should be refused.
The company appealed against both findings. Whilst the substantive appeal is pending, the Court of Appeal has already given some indication, when dismissing the company’s application for an interim injunction. The company’s argued that the lower court erred in adopting a narrow interpretation of the arbitration clause was said to be reasonably arguable. However, the Court of Appeal commented that the company’s argument that the merits of the defence are entirely irrelevant in an application for an anti-suit injunction is not reasonably arguable – the grant of an anti-suit injunction cannot be considered in a vacuum. The Court will also look at the prospects and merits of the defence being raised.
The much-anticipated Court of Appeal decision in the substantive appeal will have a significant impact on how arbitration clauses should be drafted.
(b) The Dynamics Between Foreign Exclusive Jurisdiction Clauses and Payment Condition for Late Filing of Opposing Affirmation
Re Tritech Distribution Limited [2026] HKCFI 473 concerned the imposition of a payment condition on a company seeking leave to file an opposing affirmation out of time. Under Practice Direction 3.1, when a company facing a winding-up petition failed to file an affirmation opposing the petition in time seeks leave to file out of time, such leave to file should be accompanied by a condition for the company to pay into court a substantial proportion of the debt relied on in the petition. This ensures that a company takes a petition seriously and deals with it promptly.
This was the exact situation in Re Tritech, where the Court made a payment condition requiring the company to pay 50% of the underlying debt. The company appealed against such condition, arguing that it effectively brought the dispute to Hong Kong, whereas it should instead be litigated in a foreign court, given the exclusive jurisdiction clause.
The Court rejected the appeal on two bases. First, the effect of the payment condition was to ensure that the company take the matter seriously, rather than to bring the dispute into the Court’s jurisdiction. Since the company had not filed an affirmation to demonstrate a bona fide dispute of the debt, the Court could not decide whether the defence bordered on the frivolous or was an abuse of process. Without an answer to this, the Court had no basis to decide the effect of an exclusive jurisdiction clause according to principles in Re Guy Lam. Second, even if the dispute was to be commenced in a foreign court, the payment condition could still be imposed alongside a foreign proceedings condition (i.e. a condition for the company to commence an action disputing the underlying debt in the proper forum within the time limit). There was no conflict between the two.
Thus, the usual practice of imposing a payment condition is not affected by Re Guy Lam. This is a mechanism ensuring that companies file evidence in a timely manner, which precedes any question of jurisdiction.
For further information, please contact:
Paul Kwan, Partner, Deacons
paul.kwan@deacons.com
