Since the signing of meeting minutes regarding mutual recognition and assistance in insolvency proceedings between Mainland China and Hong Kong courts in May 2021, there have been a number of requests for Letters of Request to be issued by the Hong Kong Court to the Bankruptcy Court of the Shenzhen Intermediate People’s Court. The recent case of Hong Kong Fresh Water International Group Limited case (in liquidation)  HKCFI 924 included another request for recognition and assistance by Hong Kong liquidators in mainland China, but it was the first request for a letter of request to be made to Shanghai Intermediate People’s Court No. 3 (Shanghai Court) .
The cooperation mechanism provides for mutual recognition of insolvency processes and office holders by the Hong Kong High Court and Intermediate People’s Courts in three pilot cities: Shenzhen, Shanghai and Xiamen.
The two important documents under the cooperation mechanism are (i) Minutes of the Meeting of the Supreme People’s Court and the Government of Hong Kong Special Administrative Region and Mutual Recognition and Assistance in Bankruptcy Proceedings (Insolvency) between the Mainland China Court and the Hong Kong Special Administrative Region” (meeting report), and (ii) the “Advice of the Supreme People’s Court on the Adoption of a Pilot Measure Regarding recognition and assistance with bankruptcy (insolvency) proceedings in the Hong Kong Special Administrative Region” (CPS opinion). Our item, Hong Kong’s first application for recognition and assistance of liquidators in mainland Chinadetail the application requirements and procedures.
Hong Kong Fresh Water International Group Limited (Company) was incorporated in Hong Kong. It is part of a group led by Ozner Water International Holding Limited (Mother), which is incorporated in Cayman Islands and listed in Hong Kong. The Company’s principal assets on the mainland are its participation in subsidiaries incorporated in Shanghai. The parent company and the company are both in liquidation in Hong Kong.
The same parties were appointed liquidators of the Parent Company on April 16, 2021, and liquidators of the Company on July 27, 2021 by the Hong Kong court. There was an urgent need for the liquidators to control the Shanghai subsidiaries, as investigations showed that the management of the Shanghai subsidiaries had apparently hijacked the business of the Shanghai subsidiaries and continued to use the association with the parent company as a listed entity, while ignoring liquidators’ requests for information. The liquidators had to obtain recognition and assistance in Mainland China in order to manage the Company’s significant assets in Mainland China, particularly the Shanghai subsidiaries.
Application letter request
The Honorable Justice Harris referred to his decision in Re Samson Paper Co Ltd (in voluntary liquidation from creditors)  HKCFI 2151), which set out the principles governing the grant of letters rogatory and the procedure for recognition specified in the CPS opinion, and held that the granting of letters rogatory in this case was consistent with the principles set out in the meeting file and the opinion of the CPS. In particular, although the Company was not incorporated in Hong Kong, Hong Kong is the center of principal interests of the Company, where the Parent Company was listed. In addition, the Court found that the center of main interests of the company had been in Hong Kong for more than 6 months before the filing of the application.
This is yet another case in which a letter of request was sent to a mainland court for the Hong Kong liquidators to obtain recognition and assistance on the mainland. We anticipate that as parties become accustomed to the process, there will be more requests for letters rogatory from the Shanghai court, and eventually the system will be open to courts beyond the three pilot cities.