UPDATE on Hong Kong Court’s Willingness to Grant Recognition of and Assistance to Foreign Liquidators: Global Brands Group Holding Limited (in liquidation) [2022] HKCFI 1789

In  Global Brands Group Holding Limited (in liquidation) [2022] HKCFI 1789, Harris J granted recognition of and assistance to the provisional liquidators, and at the same time took the opportunity to notify future applicants of the latest requirements for similar recognition and assistance given to them by the Hong Kong Courts.

The Global Brands case is another  liquidation case where a provisional liquidator was appointed by the Bermudian Court, the same place where Global Brands was incorporated and wound up.

The provisional liquidator had been trying to take possession of the Company’s assets in Hong Kong from custodians, which, expectedly, required the provisional liquidator to obtain a local recognition order before they will release the funds to him.

The Court noted the criteria for granting recognition and assistance to foreign liquidators has been: (a) that the foreign insolvency proceedings are collective insolvency proceedings; and (b) that the foreign insolvency proceedings are open in the company’s country of incorporation. Having revisited the jurisprudence of modified universalism, the Court introduced a new criteria to be adopted in the future in determining whether or not foreign insolvency proceedings should be recognised and assistance granted:–

  1. that the foreign proceedings should constitute a collective insolvency process; and
  2. that the proceedings should be conducted in a jurisdiction in which the Company’s centre of main interests (COMI) is located. Examples of the factors to help determine a company’s COMI are the location of the directors and board meetings, the company’s principal officers, operations, assets, bank accounts, books and records, and the location in which the restructuring activities took place.

The Court also noted that if the liquidators are not appointed in the COMI of the company but its country of incorporation, then recognition and assistance should be declined unless the assistance sought  is limited in nature (i.e. “managerial assistance”), or the recognition and assistance sought  is a matter of practicality. The Court held that the Global Brands case fell under the first exception, given that the provisional liquidator was appointed in the Company’s place of incorporation, and that the provisional liquidator only requires an order which demonstrates that it is the lawful agent of the Company who is entitled to direct the funds to be transferred to another bank account – i.e. only managerial assistance is sought.

Although the Global Brands case confirms that common law recognition of and assistance to foreign liquidators is still possible, such recognition and assistance are now limited in scope.  In particular, it would be a challenge for “soft-touch” provisional liquidators to be recognised by the Hong Kong Court.

11 July 2022
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