RE THE JOINT PROVISIONAL LIQUIDATORS OF HSIN CHONG GROUP HOLDINGS LTD (PROVISIONAL LIQUIDATORS APPOINTED) (FOR RESTRUCTURING PURPOSES ONLY)

HCMP 313/2019 [2019] HKCFI 805 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 313 OF 2019 ________________ IN THE MATTER of Hsin Chong Group Holdings Limited (Provisional Liquidators appointed) (for restructuring purposes only) and IN THE MATTER of Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) and the inherent jurisdiction of the Court ________________ BY THE JOINT PROVISIONAL LIQUIDATORS OF Applicants HSIN CHONG GROUP HOLDINGS LIMITED (PROVISIONAL LIQUIDATORS APPOINTED) (FOR RESTRUCTURING PURPOSES ONLY) ________________ Before: Hon Harris J in Chambers Date of Written Submissions: 7 March 2019 Date of Decision: 28 March 2019 ________________ D E C I S I O N ________________ The application Hsin Chong Group Holdings Ltd is incorporated in Bermuda and listed on the Main Board of The Stock Exchange of Hong Kong Limited (“Company”). Soft-touch joint provisional liquidators have been appointed in Bermuda (“JPLs”). The JPLs have applied for recognition and assistance by the Hong Kong High Court pursuant to a letter of request issued by the Honourable Chief Justice Hargun dated 28 February 2019. Such applications are increasingly common. The form of the order sought in the present case contains some provisions, which are not in the standard order and are required by the JPLs to progress a proposed restructuring, which will be carried out in Hong Kong. It is, therefore, useful for the me to summarise for the benefit of practitioners the principles by reference to which the court determines these applications and append to these reasons the order that I will grant. What are the principles of recognition of foreign insolvency proceedings relevant to this application? The law is well-settled that the Hong Kong court will recognise foreign insolvency proceedings that comply with the following criteria: the foreign insolvency proceedings are collective insolvency proceedings, such as a Cayman provisional liquidation (eg Re Joint Provisional Liquidators of China Lumena New Materials Corp); the foreign insolvency proceedings are opened in the company’s country of incorporation (eg Re Joint Liquidators of Supreme Tycoon Ltd ). Upon the foreign insolvency proceedings being recognised, the Hong Kong court will grant assistance to the foreign officeholders: “In the case of liquidators appointed in jurisdictions with similar insolvency regimes to Hong Kong, the assistance may extend to granting orders that give the foreign liquidators substantially similar powers…” (Re Joint Liquidators of Supreme Tycoon Ltd.) The assistance may include allowing the foreign officeholders to pursue restructuring options in Hong Kong (eg Re Z-Obee Holdings Ltd ). As the law is well-settled, the Companies Court has developed a standard practice on applications for recognition orders and such applications may be granted very quickly on a written application: “The increasing number of applications for recognition and assistance in recent years has allowed a form of order to emerge that this Court will generally be prepared to grant on written application made pursuant to a letter of request. Such applications can be granted very quickly. I note for the benefit of practitioners that although such applications are very familiar to me, they will not necessarily be familiar to other judges who hear company matters, and applications should comply with Practice Direction 3.5 and be accompanied by a paginated and indexed hearing bundle to assist the court in processing them quickly.” (Re Joint and Several Liquidators of Pacific Andes Enterprises (BVI) Ltd.) To help facilitate the grant of recognition orders on the papers, the Companies Court has also provided a standard-form order to guide applicants, as set out in Re Joint and Several Liquidators of Pacific Andes Enterprises (BVI) Ltd. The order sought is consistent with the conventional recognition practice developed by the Companies Court As the Company is in provisional liquidation in Bermuda, the recognition of the Company’s proceedings in Bermuda is consistent with the existing Companies Court’s practice. Subject to what I say in [9], the powers sought by the JPLs are consistent with the standard recognition order set out in Re Joint and Several Liquidators of Pacific Andes Enterprises (BVI) Ltd. Order The powers in sub-paras 2(i)–2(vi) of the order sought are not in the standard order and are required for the purposes of the restructuring. They are specifically requested in the letter of request. For the reasons explained in my decision in Re China Solar Energy Holdings Ltd (No 2) it is not permissible to appoint provisional liquidators in Hong Kong in order to restructure the debt of the company. It is, and I summarise, permissible to appoint provisional liquidators for orthodox reasons and, after the provisional liquidators have familiarised themselves with the affairs of the company, for an interested party (commonly the provisional liquidators) to apply to court if it is thought desirable for restructuring powers to be granted to the provisional liquidators. It is not in my opinion inconsistent with Hong Kong law for restructuring powers to be granted by way of assistance to a provisional liquidator appointed over a foreign company by the court of its place of incorporation, in which a soft-touch provisional liquidation is permissible, as such powers can be granted, albeit in the more limited circumstances discussed in China Solar, to a Hong Kong provisional liquidator. I will, therefore, grant an order in the terms appended to these reasons. (Jonathan Harris) Judge of the Court of First Instance High Court Written submissions by Wilkinson & Grist, for the applicants Order The appointment of Osman Mohammed Arab and Lai Wing Lun both of RSM Corporate Advisory (Hong Kong) Limited, 29th Floor, Lee Garden Two, 28 Yun Ping Road, Causeway Bay, Hong Kong, and Mathew Conner Clingerman of KRyS & Associates (Bermuda) Ltd, Chancery Hall, First Floor, 52 Reid Street, Hamilton HM 12, Bermuda (the “JPLs”) of Hsin Chong Group Holdings Limited (Provisional Liquidators Appointed) (For Restructuring Purposes Only) (the “Company”) pursuant to the Order of the Supreme Court of Bermuda on 19 February 2019 (the “Appointment Order”) be recognised by this Court. The JPLs have and may exercise such powers as are available to them as a matter of Bermuda law and would be available to them under the laws of Hong Kong as if they had been appointed provisional liquidators of the Company under the laws of Hong Kong and in particular, but without prejudice to the generality of the foregoing, the following powers: (i) to consult with the Company in respect of, and review, on an ongoing basis, all issues relating to the feasibility of a debt restructuring plan (the “Restructuring Proposal”) as to be recommended by the directors of the Company and its advisers, including with respect to the necessary steps which need to be taken in order for the Restructuring Proposal to be successfully implemented to allow the Company to continue as a going concern; (ii) to do all things necessary to implement the Restructuring Proposal in consultation with the board of directors of the Company (the “Board”); (iii) for the purpose of any proposal to be presented to the Hong Kong Stock Exchange (the “SEHK”) for the resumption of trading of the Company’s shares, conducting necessary investigations including but not limited to: (a) investigations to satisfy all conditions imposed by the SEHK as set out in the Company’s SEHK announcements dated 12 June 2017, 6 September 2018 and 21 December 2018; (b) to undertake a review of internal control systems; (iv) to monitor, oversee and supervise the Board and the continuation of the business of the Company under the control of the Board pending the implementation of the Restructuring Proposal; (v) with the consent of the Board to do all acts and to execute in the name of and on behalf of the Company, all deeds, receipts and other documents and for that purpose to use, when necessary, the seal (if any) of the Company; (vi) for the purpose of a restructuring, to ascertain and conduct investigations into the affairs of the Company, its subsidiaries or such joint-ventures, associated companies or other entities in which the Company has an interest. (vii) to request and receive from third parties documents and information concerning the Company and its promotion, formation, business dealings, accounts, assets, liabilities or affairs including the cause of its insolvency; (viii) to locate, protect, secure and take into their possession and control all assets and property within the jurisdiction of the courts of Hong Kong to which the Company is or appears to be entitled; (ix) to locate, protect, secure and take into their possession and control the books, papers, and records of the Company including the accountancy and statutory records within the jurisdiction of the courts of Hong Kong and to investigate the assets and affairs of the Company and the circumstances which gave rise to its insolvency; (x) to retain and employ barristers, solicitors or attorneys and/or such other agents or professional persons as the JPLs consider appropriate for the purpose of advising or assisting in the execution of their powers and duties; and (xi) so far as may be necessary to supplement and to effect the powers set out at sub-paragraphs (vii) to (ix) above, to bring legal proceedings and make all such applications to this Court whether in their own names or in the name of the Company on behalf of and for the benefit of the Company including any applications for: (a) orders for disclosure, the production of documents and/or examination of third parties which it is anticipated may be made by the JPLs to facilitate their investigations into the assets and affairs of the Company and the circumstances which gave rise to its insolvency; and/or (b) ancillary relief such as freezing orders, search and seizure orders in any legal proceedings commenced. Anything that is authorised or required to be done by the JPLs is to be done by all or anyone or more of the persons appointed. For so long as the Company remains in provisional liquidation in Bermuda, no action or proceeding shall be proceeded with or commenced against the Company or its assets or affairs, or their property within the jurisdiction of the courts of Hong Kong, except with leave of this Court and subject to such terms as this Court may impose. The JPLs do have liberty to apply. The costs of this application be paid out of the assets of the Company as an expense of the provisional liquidation.