Manage parallel insolvency proceedings in different jurisdictions?

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When creditors try to collect debt from a troubled business in different jurisdictions, they incur significant costs. In particular, in Hong Kong, creditors could apply to the High Court to sanction an arrangement, in the hope of settling the debt. While the High Court would decide whether it is appropriate to sanction the scheme, it would also consider whether it is appropriate for creditors to pursue parallel proceedings in multiple jurisdictions.

In Da Yu Financial Holdings Limited [2019] HKCFI 2531, the Court sanctioned an arrangement to be made between the company in liquidation and its general unsecured creditors. In addition to reviewing the legal principles that govern the Court’s discretion to sanction a project, the Deputy High Court Judge, Mr. William Wong SC, expressed his views on cross-border coordination. He was of the view that the idea that parallel regimes are necessary in such circumstances seems to be an outdated way of conducting cross-border restructuring, and that requiring foreign mandate holders to initiate parallel proceedings is very ” “antithesis»Cross-border insolvency cooperation. The Court drew the attention of creditors to the possibility of avoiding parallel insolvency proceedings, when they could obtain the desired remedies by equivalent proceedings before the domestic forum.

As regards parallel insolvency proceedings, a recent development has taken place. In an even more recent case Re Grand Peace Group Holdings Ltd [2021] HKCFI 1563, Hon. Harris J felt that there is very little justification in most cases for a regime to be introduced in the place of incorporation (which is not Hong Kong). The Court also stated that in the future any company or any provisional liquidator proposing the introduction of parallel regimes must be satisfied that it is in the best interests of unsecured creditors. Without such justification, the Court could reject the application for sanction of the proposed regime.

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