Naomi Moore Quoted by IFLR on First Recognition Order Under HK-PRC Insolvency Mechanism

For its article “First recognition order made by Chinese court under HK and PRC insolvency arrangement,” International Financial Law Review quoted Akin Gump financial restructuring partner Naomi Moore on what IFLR characterized as the first PRC recognition order under the Hong Kong and PRC mutual recognition cooperation mechanism on insolvency proceedings.

According to the publication, under the May 2021 cooperation agreement, Hong Kong liquidators can apply for recognition of insolvency proceedings, while PRC bankruptcy administrators can apply to the Hong Kong High Court for recognition of mainland bankruptcy proceedings.

Moore said, “This will be welcomed by Hong Kong SAR insolvency office-holders, given the often close nexus between Hong Kong SAR companies and the mainland.” She added that she expects that insolvency office-holders would be following the case in question, Samson Paper, closely to see “how successful the liquidators are in practice in exercising their recognised powers in the mainland, including the power to take control of the company’s assets, seals, accounts and other books and records.”

On the topic of offshore parent companies for Hong Kong Exchange-listed Chinese corporates, Moore said that, if the required jurisdiction criteria can be met, such companies with parents and principal issuers of foreign debt incorporated in jurisdictions such as Bermuda, the Cayman Islands or the British Virgin Islands can be put into liquidation in Hong Kong. She noted, however, “If too narrow an approach to COMI [center of main interests] is adopted, this may limit the utility of the cooperation arrangement for liquidators appointed over HKEX-listed Chinese groups.”

On a new case, Zhaoheng Hydropower (Hong Kong), whose jurisdictional facts resemble those of Samson Paper insofar as the company is incorporated in Hong Kong with assets in Shenzhen, Moore said, “It would therefore be reasonable to expect that recognition and assistance should be granted in this case too, although it is worth noting that the cooperation arrangement gives the mainland court considerable discretion in determining whether or not to grant such an order and the courts in the mainland are not bound by precedent.”