RE GUANGDONG INTERNATIONAL TRUST & INVESTMENT CORPORATION HONG KONG (HOLDINGS) LTD (In Creditors’ Voluntary Liquidation)

RE GUANGDONG INTERNATIONAL TRUST & INVESTMENT CORPORATION HONG KONG (HOLDINGS) LTD (In Creditors’ Voluntary Liquidation)

The court directed that the liquidators may distribute the Mainland RMB asset by remitting it in its entirety to identified Mainland bank accounts of creditors willing to accept RMB dividends and may distribute the Hong Kong assets pari passu to all other creditors (with hotchpotting against RMB dividends), because the RMB asset is a chose in action governed by Mainland law subject to distribution restrictions, Hong Kong insolvency law does not override the lex situs limitations, and the proposed procedure preserves collective administration and the substantive pari passu principle among eligible creditors.

Citation
[2018] HKCFI 2498
Parties
Company in Creditors' Voluntary Liquidation: Guangdong International Trust & Investment Corporation Hong Kong (Holdings) Limited; Applicant (liquidators Seeking Directions): The Joint Liquidators; Interested Class of Respondents: Creditors of the Company
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
10 October 2018
Case Number
HCMP2638/2017
Procedural Posture
Section 255 Application for Directions Under Companies (winding Up and Miscellaneous Provisions) Ordinance (cap 32) / Chambers Hearing and Decision on Liquidators' Directions
Outcome
Direction granted in terms of the draft order appended to the applicant's skeleton argument
Legal Topics
Pari Passu Distribution, Lex Situs of Choses in Action, Distribution of Foreign Currency Assets, Assignment of Debts/form 72, Hotchpot Rule
Source Language
EN
Insolvency Cross Border Insolvency Conflict of Laws Company Law Pari Passu Distribution Lex Situs of Choses in Action Distribution of Foreign Currency Assets Assignment of Debts/form 72 +1 more

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Parties

Guangdong International Trust & Investment Corporation Hong Kong (Holdings) Limited

Company in Creditors' Voluntary Liquidation

The Joint Liquidators

Applicant (liquidators Seeking Directions)

Creditors of the Company

Interested Class of Respondents

Procedural Posture

Section 255 Application for Directions Under Companies (winding Up and Miscellaneous Provisions) Ordinance (cap 32) / Chambers Hearing and Decision on Liquidators' Directions

Legal Issues

  1. 1 Whether liquidators may distribute Mainland RMB assets only to creditors with Mainland bank accounts under Mainland law and Hong Kong insolvency principles
  2. 2 Whether such a procedure breaches the pari passu principle under Hong Kong law
  3. 3 Whether the liquidators may rely on Forms 72 and similar transfer documents to determine entitlement and make payments to assignees

Ratio Decidendi

The court directed that the liquidators may distribute the Mainland RMB asset by remitting it in its entirety to identified Mainland bank accounts of creditors willing to accept RMB dividends and may distribute the Hong Kong assets pari passu to all other creditors (with hotchpotting against RMB dividends), because the RMB asset is a chose in action governed by Mainland law subject to distribution restrictions, Hong Kong insolvency law does not override the lex situs limitations, and the proposed procedure preserves collective administration and the substantive pari passu principle among eligible creditors.

Court Disposition

Direction granted in terms of the draft order appended to the applicant's skeleton argument

Orders

  • Liquidators permitted to withdraw the RMB Asset and remit it in full to specified Mainland bank accounts of creditors who have Mainland accounts and accept RMB dividends, on a pari passu basis
  • Liquidators permitted to distribute Hong Kong assets to all creditors (excluding those who have received RMB dividends) on a pari passu basis, applying the hotchpot rule as necessary