Re China All Access (Holdings) Ltd

HCCW 431/2020

[2021] HKCFI 1842

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 431 OF 2020

________________________

________________________

Before:  Hon Harris J in Court

Date of Hearing:  21 June 2021

Date of Decision:  21 June 2021

________________

D E C I S I O N

________________

1.The present amended petition was last before me on 7 June 2021. I adjourned the petition for two weeks in order to give the Company the opportunity to pay the debt which it is not disputed is owed to the Petitioner. I was told that payment would be possible because a subsidiary of the Company would be in possession of sufficient funds, HK$25 million, to effect the payment.

2.As it transpired the cheque that was presented was dishonoured. The Petitioner has returned to court this morning and seeks an immediate winding up order.  Two supporting creditors take the same position.  The Company has asked for a further week in order to make another attempt to satisfy the Petitioner’s debt.

3.I take the view that having been given the opportunity once, and the Petitioner and the only two other creditors who have given notice of an intention to appear on the petition taking the view that the better course is that the Company is wound up, I should be guided by the views of the creditors unless there is a good reason to do otherwise.

4.The Company also disputes the Petitioner’s submission that an immediate winding up order should be made on the grounds that the second [1] of the three core requirements which have to be satisfied before the court exercises its discretionary jurisdiction to wind up a company incorporated in a foreign jurisdiction, in this case the Cayman Islands, cannot be satisfied.  The reason this is contended is that the Company’s assets are located in the Mainland and Malaysia.  As I understand the position the majority of the assets are located in Shenzhen.  The operating subsidiaries are separated from the holding company by intermediate subsidiaries incorporated in the British Virgin Islands (“BVI”).

5.Mr Tang who appeared for the Company referred me to my decision of November 2020 of Re China Huiyuan Juice Group Limited [2], in which I discuss in detail the difficulties which liquidators appointed in Hong Kong over a foreign incorporated holding company may have in obtaining control of operating subsidiaries in the Mainland, if the group’s structure includes intermediate subsidiaries incorporated in the BVI.  However, things have moved on substantially since November 2020.

6.On 14 May of this year, the Secretary for Justice and the Supreme People’s Court signed a cooperation mechanism for mutual recognition of insolvency processes.  This consists of two documents, which in English are called 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” and the Supreme People’s Court’s “Trial Opinion on taking forward a pilot measure in relation to Recognition and Assistance to Bankruptcy (Insolvency) Proceedings of the Hong Kong Special Administrative Region.”

7.The arrangement provides for the first time a mechanism by which the courts of three intermediate jurisdictions in the Mainland have the jurisdiction to recognise liquidators appointed by this court.  A central component of the arrangement is that the test applied by the Mainland court involves assessing whether in the six-month period before an application for recognition  is made, the centre of main interest of the relevant company has been located in Hong Kong.  If it is, then, regardless of where the Company is incorporated, the Mainland court may recognise the liquidators appointed by the Hong Kong court and grant them assistance to carry out their function within that court’s jurisdiction.

8.Amongst the three courts is the Shenzhen Intermediate People’s Court.  It is, therefore, on the face of the matter reasonably likely that the liquidators appointed over the Company by this court, the Company has its centre of main interest in Hong Kong, can be recongnised in Shenzhen. Similarly if action can be taken to appoint liquidators in Hong Kong over subsidiaries incorporated in the BVI, which also have their centre of main interest in Hong Kong, which is likely, they can be recognised in Shenzhen. Liquidators appointed over the BVI subsidiaries could then take steps to take control of the Mainland subsidiaries, of which the BVI subsidiaries are the immediate holding companies.

9.As the test which is now applied when the court assesses the second core requirement, is whether or not the Petitioner has demonstrated a real possibility of the Petitioner benefiting from a winding up order, it seems to me that on the facts of this particular case, that test is on the balance of probabilities satisfied.

10.In addition, it does not appear to be in dispute that the majority of the board of the Company reside in Hong Kong, and are, therefore, subject to the in personam jurisdiction of this court. It will, therefore, be possible for liquidators to seek orders from this court requiring the directors to execute documents necessary to enable the liquidators to take control of subsidiaries.

11.It seems to me that in these circumstances, the Petitioner is able to demonstrate that there is a real possibility of the winding up order benefiting it and that the second core requirement is satisfied.  I would note, however, that given the evidence that has been filed concerning the issues, which is not detailed, and the fact that I am dealing with this in the Monday list, this decision is, as will be evident from its brevity, not a thorough consideration of the impact and implications of the new arrangement.  That is a matter which I anticipate I will have the opportunity to explore in more detail on another occasion.

12.I will, make the normal winding up order.

Ms Rosa Lee, instructed by Clyde & Co, for the petitioner & the supporting creditor (Dong Zhaofan)

Mr Howard Tang, instructed by Francis Kong & Co, for the company

Attendance of Oldham, Li & Nie, for the supporting creditor, was excused

Mr Raymond Kong, instructed by Official Receiver’s Office, for the Official Receiver