A Way Forward: The “No Look Through” Principle and How Ultimate Investors of Intermediated Securities Might Proceed Against Issuers

In a recent Court of First Instance (“CFI“) decision, China Ping An Insurance Overseas (Holdings) Limited v Luck Gain Limited and ors [2023] HKCFI 3315, the CFI has demonstrated how investors with beneficial interest in global notes might be able to proceed against the issuer, notwithstanding the obstacle that such investors do not normally have standing to present a winding-up petition against issuers directly. Such an obstacle is commonly known as the “no look through” principle.

The “No look through” Principle

By way of background, bonds nowadays are rarely issued to investors as a definite note. Instead, a global note representing an entire issuance will be issued, which will then be deposited in a common depositary for the relevant clearing systems. Trading of bonds would then occur through the book-entry system maintained by the clearing systems. What the ultimate investor actually acquires is a portion of the indirect beneficial interest in the global note via their intermediaries, such as banks and brokers holding accounts with the clearing systems. In other words, the ultimate investor derives its interest in the securities through a chain of intermediaries between itself and the issuer.

In relation to the rights of an ultimate investor against the issuer in a typical global bond structure, the courts of Hong Kong have currently aligned themselves with the position of the United Kingdom, the Cayman Islands and Bermuda by adopting the “no look through” principle in Leading Holdings Group Limited [2023] HKCFI 1770.

Under the “no look through” principle, the ultimate investor would only have rights against their immediate counterparty in the chain of intermediaries, which is usually the banks or brokers who have accounts with the clearing systems. Should the ultimate investor decide to petition for a winding-up against the issuer, the investor would have no standing to do so. The rationale behind is to ensure that all the bondholders would act through the trustees, in order to prevent duplicity of actions (For a detail analysis of Leading Holdings Group Limited, see our previous article).

China Ping An Insurance Overseas (Holdings) Limited


In China Ping An Insurance Overseas (Holdings) Limited, a principal amount of US$200,000,000 of guaranteed bonds (“Bonds“) was issued by the 1st Defendant (“Issuer“). The Bonds were constituted by a Deed of Covenant, a Fiscal Agency Agreement and a Global Certificate (collectively, “Bond Documents“), and were being cleared and settled through Euroclear Bank S.A./N.V (“Euroclear“). In this regard, the Bonds were structured in the typical way as mentioned above, where a single Global Certificate was issued and held by a custodian (who is the sole registered holder of the Global Certificate), who in turn, held the Global Certificate on behalf of Euroclear.

The Plaintiff holds beneficial interests of the Bonds through Bank of China (Hong Kong) Limited , which is an account holder in Euroclear. In particular, the Plaintiff has subscribed for an aggregate amount of US$190,000,000 of Bonds, constituting (i) an amount of US$50,000,000 of Bonds acquired under a Subscription Agreement entered between the Plaintiff, the issuer and the guarantor (“Subscription Agreement“); and (ii) US$140,000,000 of Bonds further acquired through the market.

Under Clause 4.2 of the Subscription Agreement, the Issuer and the Guarantor were obliged to make satisfactory arrangement to the subscriber (i.e. the Plaintiff) to ensure that Certificates are delivered to the registrar for authentication in accordance with the Fiscal Agency Agreement. The Fiscal Agency Agreement and the Global Certificate in turn provide for the exchange of the Global Certificate for Definitive Certificates if any of the events of default occurs.

Subsequently, the Issuer failed to pay the principal amount of the Bonds, and the demands to exchange the Global Certificate for Definitive Certificates were unanswered. This constituted one of the events of default.

Following an unsuccessful winding up petition against the Issuer due to a lack of standing, the Plaintiff attempted to overcome the obstacle by commenced proceedings for specific performance under Clause 4.2 of the Subscription Agreement to compel the Issuer to issue Definitive Certificates, which would then enable the Plaintiff to enforce the debts directly against it.


In a decision in favour of the Plaintiff, the CFI explained that the ordinary and plain meaning of Clause 4.2 of the Subscription Agreement clearly confers the Plaintiff a right to compel the Issuer and the Guarantor to exchange the Global Certificate for Definitive Certificates.

In rejecting the defendant’s argument that Clause 4.2 should be interpreted in light of the Global Note structure in place (and hence finding the Plaintiff successful would be an encroachment to the “no look through” principle), the CFI did not see any inconsistencies between Clause 4.2 of the Subscription, and the underlying Global Note structure as provided by the Bond Documents, which is the natural consequence of the Issuer entering into separate agreements with the Plaintiff. This is the case even if it would mean the risk of duplicity of actions.

Specific performance is granted accordingly, allowing the ultimate investor to then have a direct right to enforce against the Issuer.


The case of China Ping An Insurance Overseas (Holdings) Limited importantly demonstrates that where an entitlement for the exchange of the global certificate for definitive certificates is provided contractually, an ultimate investor may still proceed against the issuer notwithstanding the “no look through” principle.  It should be noted that here, the Plaintiff was able to enforce a direct contractual right against the Issuer.  Quite often is the case, a beneficial bondholder who is not the registered holder and does not have a direct contractual relationship with the issuer (or otherwise, whose rights are expressly curtailed by the underlying document, often, the indenture), may find him/herself having no standing against the issuer.  We would, in that scenario, have to be creative and think out of the box to find a way for such a bondholder to exert pressure on the issuer and work towards a recovery, which we are seeing in a case we are working on.

See the full judgment of China Ping An Insurance here.

4 January 2024
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