Re Jingrui Holdings Ltd

HCCW 568/2024

[2026] HKCFI 246

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 568 OF 2024

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J U D G M E N T

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The Petition

1.The Petitioner, China Citic Financial AMC International Holdings Limited, issued the Petition on 8 October 2024 (amended on 11 February 2025) seeking an order winding-up the Company on the grounds of insolvency.  The Company is incorporated in the Cayman Islands.  It is an unregistered company within the meaning of section 326 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap. 32 (“Ordinance”).  It is listed on the Main Board of the Hong Kong Stock Exchange.  The Petitioner asserts that the Company owes it US$159,946,246.7 (“Debt”).

2.The debt arose because:

(1)     The Petitioner previously lent to a borrower wholly-owned by the Company pursuant to a Facility Agreement dated 3 March 2020 (later supplemented by a Supplemental Facility Agreement dated 22 February 2022, essentially extending the loan).

(2)     The debt was guaranteed by a Deed of Guarantee dated 3 March 2020 provided by the Company (which was later affirmed by a Deed of Confirmation dated 22 February 2022, essentially confirming that the Company remains liable even after the execution of the Supplemental Facility Agreement dated 22 February 2022) (collectively, the “Deeds”).

(3)     The debt is due but the Company has not paid despite being served with the Statutory Demand on 3 January 2024 (and further demands in December 2024 and a 2^nd Statutory Demand on 2 January 2025).

3.As the Company is a foreign company the Petitioner must demonstrate sufficient connection between the Company and Hong Kong to justify the Hong Kong Court exercising its statutory discretionary power to wind it up.  The Petition identifies the following connecting factors.

(1)     The listing.

(2)     The Company’s registration under Part XI of the Ordinance.

(3)     The Company’s indirect shareholding in two companies incorporated and operating in Hong Kong: Jingrui HK Holdings Limited and Sincere Paragon Limited.

(4)     The instruments giving rise to the Debt are governed by Hong Kong law.

(5)     William Lo, a former director of the Company, resigned with effect from 5 December 2024.  He lives in Hong Kong.

(6)     Admiralty Harbour Capital Limited, a Hong Kong company, is (or was) the Company’s financial adviser.

4.The Petition identifies the following benefits to the Petitioner of making a winding up order in Hong Kong:

(1)     It would enable the Petitioner to recover all or part of the Debt.

(2)     The prospects of making a winding-up order will create leverage in recovering the Debt.

5.The Petition identifies the following persons as being interested in the distribution of the Company’s assets:

(1)     Its shareholders.

(2)     The Petitioner, which is incorporated in Hong Kong.

The Defence

6.The Company raises the following defences.  First, that the “three core requirements” are not satisfied, i.e., there is not sufficient connection between the Company and Hong Kong to justify the Court exercising its insolvency jurisdiction over the Company.  Secondly, the Guarantee under which the Debt is said to arise contains an arbitration clause and the dispute over the Debt should be determined by arbitration.

The three core requirements

7.The Court of Final Appeal in Kam Leung Siu Kwan v Kam Kwan Lai[1] identifies what have come to be described as the three core requirements which have to be satisfied if the Court is to exercise its winding up jurisdiction over a foreign company:

(1)     There has to be sufficient connection between the Company Hong Kong, but this does not necessarily mean there has to be assets within the jurisdiction.

(2)     There must be a real possibility that the winding-up order will benefit those applying for it.

(3)     The Court must be able to exercise jurisdiction over somebody interested in the distribution of the Company’s assets other than the Petitioner.

8.The Court of Appeal has recently reviewed how the three core requirements apply in Re Up Energy Development Group Ltd (In Liquidation)[2]. The following principles are of particular relevance to the present case.

(1)     The threshold requirements are relevant in the international context as the Hong Kong court will not wind up a foreign company if it has no legitimate interest in doing so: [40].

(2)     The second core requirement (unlike the other two) always has to be satisfied.  The test is a low one and allows flexibility as to the nature or extent of the benefit to the petitioner that needs to be shown to satisfy it. It will be satisfied “so long as the benefit can be said to be a real possibility, rather than a merely theoretical one: Shandong Chenming[3] (CFA), [56], [83]–[85]  ….. (CA) [21]–[27]”: [41].

(3)     A pragmatic approach should be applied in assessing whether it would be useful to entertain a winding-up petition in respect of a foreign company. Specifically, the Court of Final Appeal in [54] of Shandong Chenming says this:

“Likewise, a pragmatic approach should be applied in assessing whether it would be useful to entertain a winding-up petition in respect of a foreign company. The benefit that a petitioning creditor can rely upon to satisfy the second requirement will vary from case to case depending on its facts. From the authorities discussed above, the following observations can be made:

(1) There is no doctrinal justification for confining the relevant benefit narrowly to the distribution of assets by the liquidator in the winding up of the company;

(2) It is sufficient that the benefit would be enjoyed solely by the petitioners;

(3) There is also no doctrinal justification requiring the relevant benefit to come from the assets of the company;

(4) There are cases where even though there was nothing for the liquidator to administer the courts did not find any difficulty in holding that the second requirement was satisfied so long as some useful purpose serving the legitimate interest of the petitioner can be identified;

(5) The benefit need not be monetary or tangible in nature; and

(6)  The fact that a similar result could be achieved by other means does not preclude a particular benefit from being relied upon for the purposes of fulfilling the second requirement.”

(4)     The fact that a foreign company is listed in Hong Kong is not of itself sufficient to satisfy the second core requirement: [75].

9.The pen-ultimate point is particularly important as it makes clear that whether the second core requirement is satisfied is a matter of judgment which is to be exercised in a practical and commercial way.

10.It appears from the Court of Appeal’s judgment in Up Energy that the focus in the court below had been on two issues.  First, whether there were assets in Hong Kong: [54]–[58].  In [59] there is reference to Up Energy’s major assets and directors being in the Mainland.  Secondly, whether a liquidator appointed in Hong Kong was necessary given that the Bermuda’s liquidator had already been recognised in Hong Kong: [59]–[63].  I note that Up Energy was incorporated in Bermuda and listed in Hong Kong.

11.The argument before me centred on whether the second core requirement could be satisfied, namely, whether any real benefit had been shown.  The Petitioner relied first on the presence of Mr Lo, who could be examined on the affairs of the Company. The argument advanced by Mr Ng focused on Mr Lo’s ability to throw light on matters, which in my view largely go to the reason why the Company has become insolvent.  This is a matter to be investigated in a Hong Kong winding-up, but so far as the creditors are concerned it seems to me difficult to characterise this as a real benefit to them.  What they want is their money back.  Knowing why they have not received it is likely to be viewed as pyrrhic consolation.  The second ground has more substance.

12.Once the Company is in liquidation in Hong Kong its liquidators can apply for recognition under the 2021 Record of Meeting of the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region on Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region (最高人民法院與香港特別行政區政府關於內地與香港特別行政區法院相互認可和協助破產程序的會談紀要) and the Supreme People’s Court’s Opinion on Taking Forward a Pilot Measure in relation to the Recognition and Assistance to Insolvency Proceedings in the Hong Kong Special Administrative Region (最高人民法院關於開展認可和協助香港特別行政區破產程序試點工作的意見); which together I shall refer to as the “Pilot Scheme”.  It is not in dispute that the Company’s major operating and asset owning subsidiaries are in the Mainland. The Petitioner argues that a liquidator appointed by the Hong Kong Court may be able to apply for recognition and assistance in the Mainland pursuant to the Pilot Scheme or alternatively take action to recover any monies owed to it by its subsidiaries.  The Company has filed an expert opinion from Mr Liu Zhonggui a partner in Grandall Law Firm (Shanghai).  Mr Liu suggests that if liquidators appointed by the Hong Kong court are not recognised by the relevant Mainland court, the Hong Kong liquidators could not dispose of the Company’s equity interests in its Mainland subsidiaries in the Mainland.  As far as it goes this assertion may be correct.  Mr Liu is also correct that recognition under the Pilot Scheme would depend on factors such as the Mainland court being satisfied that the Company’s COMI is in Hong Kong and the application for recognition being made to one of the three jurisdictions included in the Pilot Scheme.  The Company says that the Petitioner is not able to point to a case where Hong Kong liquidators of a foreign incorporated company have been recognised in the Mainland.

13.I accept that there is (as far as I am aware at the time of writing this Judgment) no case of a Hong Kong liquidator appointed over a foreign company being recognised by a Mainland court.  But I am not aware of such an application yet being made.  The tenor of the Pilot Scheme and the development of cross-border law and practice between Hong Kong and the Mainland is clear.  We aim to recognise and assist each other’s processes.  We do not go looking for problems, although they will be encountered.  It is clearly arguable that the COMI of a Hong Kong listed company (as opposed to its subsidiaries) is in Hong Kong.  It seems to me that the principles I referred to earlier are sufficiently accommodating that the second core requirement is satisfied by the possible availability of recognition in the Mainland unless there is a substantial reason to think that a particular case is unusual and recognition will not be possible.  Recognition and the ability to seek to gather assets in the Mainland (whether interests in subsidiaries or inter-company debts) are potentially a significant benefit to the Petitioner and other unsecured creditors.  In my view the second core requirement is satisfied by this prospect in the present case.

Arbitration

14.There was argument before me as to the correct approach in dealing with a claim by a putative debtor that the debt relied on to prove locus to present a petition (and if established deemed insolvency) is disputed and the dispute should be resolved in accordance with an arbitration clause in the agreement said to have given rise to the debt.  This issue I have addressed comprehensively in my recent judgment in Re a Debtor, Xu Peixin[4] at [4]–[22].  There is no need to repeat it here.

15.There is no dispute that Clause 22 of the Guarantee and Clause 5(1) of the associated Deed of Confirmation contain arbitration clauses, which are wide enough to cover a dispute over whether there is a defence to the Debt.  An arbitration has not been commenced by the Company.

16.The Company first asserted a defence and that the resulting dispute should be arbitrated in its affirmation in opposition made by Mr Yan Hao.  He says that there are genuine disputes, which he describes as:

(1)     The Guarantee requires a written demand for payment and the Company has no record of receiving one.  Given service of the Statutory Demand this is a non sequitur.

(2)     The Deed was not properly executed as a deed.  It was only signed on behalf of the Company and not sealed.  It was not sealed by the Petitioner and the signatory, Jiang Bingxian, is one of the secretaries and authorised representatives of the Company.  It is unclear whether she had authority to execute the Deed.

(3)     The loan that was guaranteed was secured by a share charge.  This was not a point advanced before me.

17.However, at this stage I am concerned to determine the following questions:

(1)     Has the Debtor demonstrated a genuine intention to arbitrate?

(2)     If it has, has the defence been shown to be frivolous and thus despite the presence of an arbitration clause the Court should proceed to determine the Petition.

18.As I explained in Xu Peixin the fact that a debtor does not express an intention to arbitrate until after a petition is presented does not mean that the arbitration clause ceases to be relevant.  However, in practice the later a debtor leaves it before stating clearly that the debtor disputes the debt and requires that dispute to be arbitrated the weaker the argument that the debtor has a genuine intention to arbitrate becomes.  This is particularly the case if the debtor does not take steps to commence an arbitration and has advanced no reason for its failure to do so.  The Company does not explain the reason for not commencing an arbitration until Mr Yan’s 2^nd affirmation made on 25 March 2025 in which he says that it is because of the ongoing negotiations between the parties.  Nothing had been done to commence an arbitration by the time the Petition was heard by me in October 2025 and no reason advanced for this.  It seems to me that the Debtor has fallen short of proving a genuine intention to arbitrate and I so find.  In fact to find a genuine intention to arbitrate on the facts of this case would rob the test of substance.  If a debtor can do nothing until after presentation of the petition and then satisfy the test by simply saying I dispute the debt and want it arbitrated without doing anything more, the test could be satisfied in just about every case.

Bona fide defence on substantial grounds

19.The suggestion that the Guarantee, which was clearly signed on behalf of the Debtor and by an authorised representative of the Petitioner does not record a contractual guarantee, because it was not executed as a deed, seems to me without any merit.

20.The Guarantee is self-evidently a binding transaction supported by valuable consideration provided by both the Company and the Petitioner.  The Company provided the Guarantee in consideration of the Petitioner lending to the borrower, which is (wholly owned by the Company) pursuant to the Facility Agreement of the same date (the provision of the Guarantee being a condition precedent to the release of funds by the Petitioner.  The Guarantee was obviously accepted by the Petitioner who lent to the borrower pursuant to the Facility Agreement, and the fact that the Guarantee was made “between” the Company and the Petitioner was acknowledged by the parties in the subsequent Deed of Confirmation, signed by the Company’s authorised representative and Mr Zhu for the Petitioner.

21.In the circumstances, whether or not the Petitioner has also signified its undoubted acceptance by signing the Guarantee, or whether or not the Guarantee is a deed executed by the Company, are not relevant (exactly the same argument was accepted in Signature Living Hotel Ltd v Sulyok[5], where the Court refused to restrain any winding up based on two deeds of guarantee despite alleged defects in execution).  The same applies to the Deed of Confirmation which was provided by the Company in support of the Supplemental Facility Agreement.

22.Moreover, the burden is on the Company to show that there were indeed defects in the execution of the document.  To this end, the specific requirements under section 128 of the Companies Ordinance (Cap. 622, “CO”) for a company to execute a document as a deed does not apply to a foreign incorporated company, as section 2 of the CO defines a “company” as one formed and registered under the CO, but does not include a foreign company even if it is registered in Hong Kong: Re Dejin Resources Group Co Ltd[6].  The onus is therefore on the Company to adduce sufficient evidence (including potentially foreign law evidence) to prove the alleged defect in execution, particularly when the enforceability of the Deed was supported by a contemporaneous foreign law opinion by Ogier dated 3 March 2020.

23.It seems to me that the Company has plainly not demonstrated a substantive defence.

Disposition

24.I will make the normal winding-up order.

Mr Tom Ng, instructed by Deacons, for the Petitioner

Ms Valerie Kwok, instructed by Eric Chow & Co., for the Company

Attendance of the Official Receiver was excused