In the recent case of Re Joint and Several Liquidators of Ozner Water International Holding Ltd 浩澤淨水國際控股有限公司 (In Liquidation)  HKCU 940, the Hong Kong Court of First Instance (Hong Kong Court) granted an application by the liquidators (Liquidators) of Ozner Water International Holding Ltd. (Company) for a letter of request for recognition and assistance (Letter of Request) to be issued to the Shenzhen Intermediate People’s Court (Shenzhen Court). The Letter of Request sought judicial assistance to aid the Liquidator’s asset collection efforts in relation to the Company’s assets in Mainland China.
This case is only the third letter of request ordered by the Hong Kong Court pursuant to the cooperation mechanism for mutual recognition of insolvency processes between Hong Kong and Mainland China (Cooperation Mechanism)1. Significantly, it is the first time recognition and assistance under the Cooperation Mechanism has been granted by the Hong Kong Court for a Cayman Islands incorporated company.2
The Company was incorporated in the Cayman Islands and registered as a Hong Kong-registered non-Hong Kong company under Part 16 of the Companies Ordinance (Cap. 622). The Company’s shares were listed on the Main Board of The Stock Exchange of Hong Kong. The Hong Kong Court found that the Company had a principal place of business in Hong Kong.3 The Company’s assets in Shenzhen consist of: (1) a judgment debt owed by a Shenzhen company (Shenzhen Co) to the Company and (2) receivables from Shenzhen Co.
On December 14, 2020, a winding-up petition was filed against the Company in Hong Kong. On March 17, 2021, a winding-up order was granted and on April 16, 2021, the Hong Kong Court granted a regulating order appointing the Liquidators.
Hong Kong Court’s Decision
Among other things, the Hong Kong Court considered jurisdictional matters pursuant to the Cooperation Mechanism, namely whether the Company’s centre of main interests (COMI) was in Hong Kong despite its not being incorporated in Hong Kong.4 The court observed that for a case to fall within the scope of the Cooperation Mechanism, the SPC Opinion required that the courts of Hong Kong and Mainland China be satisfied that the relevant debtor entity’s COMI was in Hong Kong. The Hong Kong Court held that the evidence showed the Company’s COMI had “been Hong Kong since its incorporation as it has always been run out of Hong Kong.”
Analysis and significance
First, this case confirms that where a non-Hong Kong-incorporated company has its COMI in Hong Kong, a Hong Kong liquidator has the right to invoke the Cooperation Mechanism, which may allow the liquidator to reach the onshore assets belonging to such company. While not explicit in the judgment, it would appear that the Company’s listing status, registration, and existence of a principal place of business in Hong Kong may have been relevant considerations in the Hong Kong Court’s conclusion that the Company has its COMI in Hong Kong. Thus, while this is a fact-specific finding by the Hong Kong Court, this judgment recognizes the possibility that Hong Kong-listed company incorporated in the Cayman Islands (or other offshore jurisdictions) with onshore operations and assets can be found to have a COMI in Hong Kong.
The court’s conclusion is consistent with Article 4 of the SPC Opinion, which states that aside from place of incorporation (which is generally determinative), factors such as place of principal office, principal place of business, and place of principal assets are relevant in determining an entity’s COMI. However, the Shenzhen Court will make its own determination on the Company’s COMI upon review of the Letter of Request. It remains to be seen whether the Shenzhen Court will reach the same conclusion as the Hong Kong Court in this regard and how the Shenzhen Court will respond to the Letter of Request.
Second, the case also illustrates the types of assets that a Hong Kong liquidator can seek to reach. Such assets are not limited to more common forms, such as bank accounts, properties, and shares in onshore operating companies but also include judgment debts and receivables owed to the relevant company.
1 The Cooperation Mechanism consists of (i) 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 (Meeting Record); and (ii) 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 (SPC Opinion), which was issued to implement the Meeting Record.
2 The first two applications related to Hong Kong companies. See our Update: Hong Kong Liquidators Reach Mainland Assets, in relation to an earlier application involving Samson Paper Company Limited here.
3 While not explicit in the decision, the Company’s annual report states that its principal place of business was in Hong Kong and it also had its headquarters, head office, and principal place of business in Mainland China.
4 SPC Opinion Article 4: “This Opinion applies to Hong Kong Insolvency Proceedings where the Hong Kong Special Administrative Region is the COMI of the debtor. ‘Centre of main interests’ referred to in this Opinion generally means the place of incorporation of the debtor. At the same time, the people’s court shall take into account other factors, including the place of principal office, the principal place of business, and the place of principal assets of the debtor. When a Hong Kong Administrator applies for recognition and assistance, the COMI of the debtor shall have been in the Hong Kong Special Administrative Region continuously for at least six months.”
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