RE USUM INVESTMENT GROUP LTD

HCMP 1719/2025 [2026] HKCFI 1320 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1719 OF 2025 ___________________ IN THE MATTER OF USUM Investment Group Limited (渝商投資集團股份有限公司) (in Bankruptcy Restructuring in the Mainland of the People’s Republic of China) and IN THE MATTER OF the inherent jurisdiction of the Court ___________________ Before: Hon Linda Chan J in Chambers Dates of Hearing: 4 November 2025 and 20 January 2026 Date of Judgment: 20 January 2026 Date of Reasons for Judgment: 3 March 2026 _________________________________ R E A S O N S F O R J U D G M E N T _________________________________ By originating summons issued on 30 September 2025 (“OS”), the administrators of USUM Investment Group Limited (渝商投資集團股份有限公司) (in bankruptcy restructuring in Mainland China) appointed by Chongqing No. 5 Intermediate People’s Court (“Chongqing Court”) on 7 February 2022 applied for: Recognition of “the bankruptcy restructuring in the People’s Republic of China of [the Company]”; Recognition of the appointment of (a) Beijing Dacheng (Shanghai) Law Firm (北京大成 (上海)律師事務所) and (b) Beijing Long An Law Firm (北京市隆安律師事務所) with a team consisting of 36 named lawyers as administrators of the Company (collectively “Administrators”) and Mr Wang Dan (王丹) appointed as the responsible person; Assistance to the Administrators so that they may exercise in Hong Kong the following powers: to request and receive from third parties all documents and information concerning the Company; to locate, protect, secure, take into possession and control all assets and property within the jurisdiction which the Company is or appears to be entitled, including but not limited to (i) the 6,851,000 issued shares (being 100% shareholding) in USUM Investment Group Hong Kong Limited, a Hong Kong company (“USUM HK”) and (ii) 978,383,181 issued shares (representing 60.95% shareholding) in Chiho Environmental Group Limited, a Cayman company whose shares are listed on the Stock Exchange of Hong Kong Limited (“HKEx”) (stock code 0976) (“ListCo”) held by USUM HK; to take into possession and control the books, papers and records of the Company within the jurisdiction and to investigate the assets and affairs of the Company, including (i) emails exchanged and other correspondence between the Company and its auditors, and the Company and other third parties, and (ii) documents and information provided by the Company to its auditors, and documents provided by the auditors to the Company in relation to the audit work; to take all necessary steps to prevent any disposal of the Company’s assets within the jurisdiction and in particular, to secure any credit balances in any bank accounts in the name or under the control of the Company; to operate, open and close any bank accounts in the name and on behalf of the Company for the purpose of collecting the assets of the Company and paying the costs and expenses of the Administrators; to retain and employ lawyers, accounts and such other agents or professional persons as the Administrators consider appropriate for the purpose of advising or assisting in the execution of their powers and duties under the order; so far as may be necessary to supplement and effect the powers set out in the order, to bring legal proceedings and make all such applications to the court, whether in their own names or in the name of the Company, on behalf and for the benefit of the Company, including applications for production of documents and examination of third parties, and/or ancillary relief and assistance such as injunction orders, freezing orders, search and seizure orders in any legal proceedings commenced; and to represent the Company in exercising its right as a shareholder of USUM HK; Anything that is authorized or required to be carried out by the Administrators may be effected by any one or more of the persons authorized by the Administrators, either by affixing the seal of the Administrators or by the signature of the persons authorized by the Administrators; If the Administrators wish to apply for a stay or other directions in respect of legal proceedings in the High Court as a consequence of the recognition of their appointment by the court, such application shall be listed before the Judge in charge of the Companies and Bankruptcy List; and The costs of the application be paid out of the assets of the Company as an expense of the bankruptcy restructuring. The application raises novel and important questions as to whether the court has power to recognize a restructuring approved by a foreign court and, if so, the extent of such assistance. The court appointed Ms Eva Sit SC and Mr Jonathan Fung as amici curiae to make submissions on the application. The court is grateful for the extremely helpful and comprehensive submissions provided by them. After hearing the submissions of the amici and the further submissions of Mr Jose Maurellet SC (leading Mr Michael Lok and Mr Charlie Liu), counsel for the Administrators, this Court made an order in terms of §78 below. These are the reasons for my judgment. A. BACKGROUND FACTS The Company was established as a private company on 27 February 2013 in Chongqing City in the Mainland with registered capital of RMB 3,420.66 million. The Company engages in investment, construction, sale of construction materials and chemical products, business consultancy and import and export business. The Company was one of the 13 companies (all of which were established in the Mainland) involved in the “Pre-Restructuring Agreement” and “Restructuring Plan” both approved by the Chongqing Court, as further described below (collectively “13 Companies”). Until 17 March 2025 (when the changes in equity took effect, as described in §27 below): Loncin Group Co., Limited (隆鑫集團有限公司) (“Loncin Group”) was the ultimate holding company of the group; Loncin Group’s registered capital was RMB 160 million. Its equity was held by Mr Tu Jianhua (涂建華) (“Mr Tu”) (98%), Mr Tu Jianmin (涂建敏) (1%) and Ms Tu Jianrong (涂建容) (1%) (collectively “TUs”); Loncin Group’s only asset was 98% equity in Loncin Holdings Co., Limited (隆鑫控股有限公司) (“Loncin Holdings”), and the remaining 2% was held by Mr Tu; Loncin Holdings held 53.29% equity in the Company; The Company held 5 wholly owned subsidiaries, including USUM HK and 4 subsidiaries established in the Mainland; USUM HK was incorporated in Hong Kong on 29 September 2014 and its paid up capital is HK$5,852 million. The principal business of USUM HK is to invest in and hold the 60.95% shareholding in ListCo; and The corporate structure chart of the 13 Companies before 17 March 2025 is reproduced in Annex 1 to this Judgment. A1. Pre-Restructuring under supervision of Chongqing Court Since 2018 the 13 Companies had been in dire financial state. On 22 March 2021, TUs urged the Chongqing Municipal People’s Government to assist and support the group to overcome its financial crisis through out-of-court restructuring, pre-restructuring and judicial restructuring, on the basis that they were fully aware of, and were willing to assume, all consequences of such restructuring including possible loss of part or all of their equity in the group and they would formulate a plan for maintaining the stability of the group. At the shareholders’ meeting held on 27 July 2021, it was resolved that Loncin Group should resolve its debt crisis through judicial restructuring and application should be made to the Chongqing Court for bankruptcy restructuring and pre-restructuring. At the general meeting of the Company held on 4 August 2021, it was resolved that the Company should submit an application to the Chongqing Court for bankruptcy restructuring and pre-restructuring. On 29 September 2021, the 13 Companies (including the Company) filed applications for permission to commence pre-restructuring on the ground that they were unable to pay their debts. On 30 September 2021, the Chongqing Court issued notices in bankruptcy proceedings no. 665/2021 and 676/2021 permitting Loncin Group and the Company to engage the 2 law firms to assist them in the pre-restructuring. During the pre-restructuring, the 13 Companies began to look for investors. On 28 December 2021, the Chongqing Court approved the Company’s application for extension of the pre-restructuring period for one month. On 29 December 2021, the 13 Companies and the investors executed a pre-restructuring investment agreement which involved investment in the amount of RMB 10,038 million. On 12 January 2022, the Administrators completed a “Substantive Consolidated Pre-restructuring Agreement of the 13 Companies” (13家公司預重整實質合併重組協議) (“Pre-Restructuring Agreement”). They also submitted to the shareholders for voting on the “Matters Concerning Adjustment of Contributories’ Interests in the Pre-Restructuring Agreement” (出資人權益調整方案) (“Pre-Restructuring Adjustment”). On 24 January 2022, Mr Tu (as contributory) voted in favour of the Pre-Restructuring Adjustment. At the second creditors’ meeting of the 13 Companies held on 19 January 2022, the Administrators submitted the Pre-Restructuring Agreement to the creditors for voting, which was closed on 26 January 2022. Mr Tu (as creditor) voted in favour of the Pre-Restructuring Agreement. On 27 January 2022, the Company submitted a report on the restructuring and pre-restructuring of the 13 Companies to the Chongqing Court, and a public hearing was held on 28 January 2022. A2. Appointment of Administrators for judicial restructuring purpose On 30 January 2022, the Chongqing Court approved the 13 Companies’ applications for judicial bankruptcy restructuring. In the Civil Ruling dated 30 January 2022, the Chongqing Court held that although the Company was balance sheet solvent (i.e. book value of its assets exceeded its liabilities), its cash fund of RMB 113,096 was not sufficient to pay the debts fallen due which amounted to RMB 980 million, and a restructuring would be beneficial to all stakeholders and was feasible. The Chongqing Court approved the Company’s application for permission to commence judicial bankruptcy restructuring pursuant to ss.2, 3, 7(1), 70(1) and 71 of the Enterprise Bankruptcy Law (“EBL”). On 7 February 2022, the Chongqing Court handed down Civil Ruling in respect of the 13 Companies (which are materially the same in respect of each company) whereby it was ordered that (“Appointment Order”): Pursuant to ss.13 and 22(1) of the EBL, the Administrators be appointed as joint administrators of the 13 Companies with Mr Wang Dan as responsible person; The Administrators shall carry out their duties diligently and in compliance with the EBL. They shall report to the Chongqing Court on their work and be subject to the supervision of the creditors’ meeting and creditors’ committee; The Administrators’ responsibilities are as follows: to take control of the assets, company seal, books of accounts and documents of the 13 Companies; to investigate the status of the assets and prepare financial statements of the 13 Companies; to decide the internal management affairs of the 13 Companies; to decide the daily operating expenses and other necessary expenses of the 13 Companies; prior to the first creditors’ meeting, to decide whether to continue or cease the business of the 13 Companies; to manage and deal with the assets of the 13 Companies; to participate in any litigation, arbitration or other legal proceedings on behalf of the 13 Companies; to convene creditors’ meeting of the 13 Companies; and to carry out any other duties as directed by the Chongqing Court. A3. Consolidated Restructuring Plan On 16 March 2022, the Chongqing Court rendered further Civil Ruling in each of the 2022 bankruptcy proceedings and ordered the 13 Companies to undergo a substantive consolidated restructuring plan. At the board meeting of Loncin Group held on 27 October 2022, it was resolved by TUs (qua directors) that the Pre-Restructuring Agreement be approved. On the same day, the Investor issued an “Explanation regarding the gift of 5% equity to contributories” to the Administrators stating that one of the Investors would voluntarily transfer 5% equity of “New Loncin Holdings Co., Limited”, the corporate vehicle designated to receive certain retained assets of the 13 Companies (“NewCo”), to TUs in order to secure their support for the restructuring plan. In October 2022, with the assistance of the Administrators, the 13 Companies finalized a “Substantive Consolidated Restructuring Plan of the 13 Companies” (13家公司實質合併重整計劃) (“Restructuring Plan”), which involves the following: Some of the specified core assets of the 13 Companies, including 100% shareholding in USUM HK and 737,610,338 shares representing 45.95% shareholding in ListCo (out of 978,383,181 shares held by USUM HK), will form part of the “retained assets”; The retained assets will be transferred to NewCo so as to preserve the integrity and continued operation of the core assets; The remaining 240,772,843 shares in ListCo (representing 15% shareholding) held by USUM HK will be applied towards repaying the debts owed to the general creditors; The remaining assets of the 13 Companies will be applied towards repaying the debts owed to their creditors, and there will not be any surplus available for distribution to the contributories; and The equity held by the contributories in the 13 Companies will be adjusted to zero, and TUs are required to transfer all their equity in Loncin Group and Loncin Holdings at nil consideration to NewCo (“Adjustment Plan”). The Restructuring Plan and the Adjustment Plan were duly approved by the creditors and contributories in that: On 28 October 2022, the Administrators issued notices to convene third creditors’ meetings of the 13 Companies to be held on 14 November 2022 for the purposes of voting on the Restructuring Plan. The Restructuring Plan was duly approved by the creditors, and the creditors were notified of the same on 17 November 2022. On 28 October 2022, the Administrators issued notices to convene contributories’ meetings of the 13 Companies to be held on 14 November 2022 for the purposes of voting on the Adjustment Plan. On 31 October 2022, Mr Tu provided his vote in support of the Adjustment Plan to the Administrators. The Adjustment Plan was approved by the contributories, and the contributories were notified of the same on 17 November 2022. On 21 November 2022, the Chongqing Court in its 4th Civil Ruling approved the Restructuring Plan and terminated the consolidated bankruptcy proceedings in respect of the 13 Companies. The 13 Companies are required to implement the Restructuring Plan within 12 months (i.e. by 21 November 2023). Despite approval of the Restructuring Plan, the Investor failed to perform its payment and investment obligations. Thereafter, the Chongqing Court approved a few extensions of time for implementation of the Restructuring Plan: On 20 November 2023, in its 6th Civil Ruling, the Chongqing Court took into account the impact of COVID-19 and approved an extension of 6 months (until 21 May 2024) for implementation of the Restructuring Plan. On 20 May 2024, in its 7th Civil Ruling, the Chongqing Court approved a further extension of 3 months (to 21 August 2024) for implementation of the Restructuring Plan, taken into account the substantial assets required to be transferred and the fact that part of the debts had already been repaid, and it would be in the interests of the creditors to allow the 13 Companies to implement the Restructuring Plan. A4. Change of Investor and opposition from TUs Meanwhile, there was a change in investor and the retained assets were split into 6 segments: On 21 May 2024, pursuant to the resolutions passed by TUs (qua directors of Loncin Group), the 13 Companies cancelled the qualification of the Investor and began to look for new investors. Following the coordination meetings arranged by the Municipal Government and the Chongqing Court, it was determined that the retained assets should be split into 6 segments (the Company’s assets formed one segment) with different investors taking up the retained assets in different segments. The Administrators considered that the change in investor did not involve any substantive change to the rights of the creditors and, therefore, it was not necessary for the creditors to vote again. However, TUs (qua directors of the 13 Companies) refused to pass any board resolutions to approve the signing of the investment agreements in respect of the 6 segments. This rendered the 13 Companies unable to implement the Restructuring Plan under the supervision of the Administrators. At the meeting of the creditors’ committee held on 28 June 2024 (“28 June Meeting”), the views of the District Government working group, the financial advisers of the Companies and the Administrators as well as the objections raised by TUs were considered. It was resolved by the creditors’ committee that the Administrators be authorised to sign the investment agreements with the investors of the 6 segments. The creditors were notified of the resolutions and no objection has been raised by them. In respect of the Company’s assets, on 26 July 2024, the Administrators entered into the Restructuring Investment Agreement and the Deferred Payment Agreement with Pingyang Yansheng Equity Investment Centre (Limited Partnership) (平陽雁晟股權投資中心 (有限合伙)) (“Pingyang”), whereby the parties agreed that: Pingyang would pay RMB 550 million to acquire from the Company (a) 477,000,000 shares in ListCo (representing 29.72% shareholding) held via USUM HK; (b) 100% equity in Chongqing USUM Renewable Resources Development Co., Limited; and (c) RMB 14 million debt owed by Taizhou Chiho-Tiande Metal Co., Ltd. The RMB 550 million would be set off against the RMB 2,551,283,014 owed by the 13 Companies to Pingyang. USUM HK shall transfer 477,000,000 shares in ListCo (representing 29.72% shareholding) to Pingyang; USUM HK shall procure the replacement of the executive directors and senior management of ListCo by the persons nominated by Pingyang; and USUM HK shall create a second legal charge over the remaining 16.23% shareholding in ListCo in favour of Pingyang. Thereafter, the Chongqing Court granted further extensions of time to allow the 13 Companies to implement the remaining part of the Restructuring Plan on the basis that it would be in the interests of the creditors to allow the Plan to be implemented: On 21 August 2024, the Chongqing Court in its 14th Civil Ruling granted a third extension of time allowing the 13 Companies to implement the Restructuring Plan by 21 February 2025. On 20 February 2025, the the Chongqing Court in its 22nd Civil Ruling granted a fourth extension of time allowing the 13 Companies to implement the Restructuring Plan by 21 August 2025. On 19 August 2025, the Chongqing Court in its 28th Civil Ruling granted a fifth extension of time allowing the 13 Companies to implement the Restructuring Plan by 21 February 2026. A5. Outstanding matters The Administrators have been able to take control and deal with all the assets of the 13 Companies located in the Mainland for the purpose of implementing the Restructuring Plan and the Adjustment Plan. On 17 March 2025, NewCo became the ultimate holding company of the group and TUs ceased to hold any equity interest in Loncin Group and Loncin Holdings. However, the Administrators have not been able to take control or transfer the Company’s asset located in Hong Kong namely, the 100% shareholding in USUM HK which, in turn, holds 978,383,181 shares in ListCo. These are the only outstanding matters for implementation of the Restructuring Plan. The difficulties faced by the Administrators came from 3 principal sources. First, the Administrators have not been able to file notice of change of directors of USUM HK at the Companies Registry (“CR”): During the period from November to December 2024, the Administrators caused the Company (as sole shareholder) to pass resolutions to remove the former directors of USUM HK and appoint Mr Xie Cheng (“Mr Xie”) as new director. On 6 December 2024, Mr Xie filed a Form ND2A with the CR giving notice of change of director with effect from that date (“Form ND2A”). Mr Tu through his solicitors’ letters dated 6 December 2024 and 10 January 2025 to the CR objected to the Form ND2A filed. Due to these objections, the CR has not registered the Form ND2A. Consequently, third parties dealing with USUM HK have not been able to confirm Mr Xie’s position as sole director of USUM HK. This, in turn, rendered Mr Xie unable to procure USUM HK to take step to change the management of ListCo or arrange the transfer of ListCo Shares to Pingyang. Second, Mr Tu continued to challenge the Administrators’ authority and actions in dealing with USUM HK: On 21 January 2025, Mr Tu applied by originating summons (in HCMP 118/2025) for leave to commence a statutory derivative action in USUM HK’s name against the Administrators and Pingyang, raising complaints about the 2 Agreements signed with Pingyang, the Restructuring Plan and the actions taken by the Administrators, the latter is said to have been done in violation of s.895 of the Companies Ordinance (Cap. 622) (“CO”). On 13 March 2025, Mr Tu issued a summons in HCMP 118/2025 to challenge the authority of the solicitors acting for USUM HK. On 29 April 2025, USUM HK issued a summons in HCMP 118/2025 to strike out the proceedings on the ground that Mr Tu has no locus to apply for leave to commence statutory derivative action in USUM HK’s name. At the hearing on 27 June 2025, DHCJ Yuen ordered the authority summons to be dealt with before the locus summons. No step has been taken by either party to fix a date for hearing either summons. Third, Mr Tu commenced 4 sets of proceedings in the Mainland concerning implementation of the Restructuring Plan on 15 July 2024, 22 October 2024, 26 December 2024 and 3 April 2025. These proceedings are not concerned with the appointment of the Administrators or their authority to act on behalf of the 13 Companies. In addition, a minority contributory of the Company issued a writ in HCA 2276/2024 (on behalf of itself and all shareholders of the Company and USUM HK) against Pingyang and the Administrators claiming that the transfer of 29.72% shareholding in ListCo had been executed without proper authority and/or was in breach of fiduciary duties, and/or had been procured by fraudulent misrepresentation and/or deceit. The writ has not been served on the Administrators. B. REQUEST FOR ASSISTANCE B1. Letter of Request On 1 August 2025, the Chongqing Court issued a letter of request, requesting the Hong Kong court to recognise and assist the Administrators in the bankruptcy restructuring of the 13 Companies (“Letter of Request”). In the Letter of Request, the Chongqing Court: referred to Civil Rulings rendered on 30 January 2022, 7 February 2022, 16 March 2022 and 21 November 2022 and described the particulars of each of the 13 Companies; set out the responsibilities of the Administrators as summarised in §17(3) above; confirmed that the place of establishment and centre of main interest (“COMI”) of the 13 Companies are in the Mainland and the consolidated bankruptcy restructuring proceedings are collective proceedings for handling and discharging their debts and liabilities; confirmed that pursuant to EBL and the Restructuring Plan, the Administrators are under a duty to supervise the implementation of the Restructuring Plan, handle legal proceedings on behalf of the 13 Companies and dispose of their assets, which continue after termination of bankruptcy restructuring proceedings in respect of the 13 Companies; and requested the Hong Kong court to recognize the substantive consolidated bankruptcy restructuring proceedings of the 13 Companies, and provide assistance to the Administrators in discharging their duties by confirming that they may exercise the powers they have under the EBL in respect of the 13 Companies within Hong Kong to the extent permitted by Hong Kong law. Despite the width of the Letter of Request (which covers the 13 Companies), in the OS, the Administrators only seek recognition and assistance in respect of the Company. This accords with the fact that only the Company has asset within the jurisdiction. B2. Important issues raised in the application The application was heard on 4 November 2025. At the hearing, this Court raised a number of issues which had not been canvassed and addressed by counsel. First, it had not been shown (and no authority had been cited) that the court has power to recognise the Restructuring Plan: The power to sanction a scheme of arrangement (a form of debt restructuring) is statutory and is to be found in ss.668-677 of the CO. The jurisdiction only extends to a company liable to be wound up under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (“CWUMPO”). This covers a Hong Kong company and a foreign company which has sufficient connection with Hong Kong. The latter reflects the practice of the court that it would not exercise a prima facie exorbitant jurisdiction over a foreign company save where it is appropriate to do. In the context of a scheme, the relevant connecting factors include the debts are governed by Hong Kong law, such that the scheme, if approved, will have a substantial effect . Hong Kong has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, which empowers the court to inter alia recognise and give effect to a restructuring or a scheme of arrangement sanctioned by a foreign court. Nor do we have any statutory power under CWUMPO or CO to assist or enforce an order made by a foreign court in relation to insolvency law in the UK under s.426 of the Insolvency Act 1986. The power to recognise foreign insolvency proceedings and assist foreign office-holders derives from common law (Re Guangdong Overseas Construction Corp (In liq) [2023] 3 HKLRD 262, §16(3)). It did not appear from the authorities cited by counsel that the power to recognise and assist foreign insolvency proceedings extends to recognition of a restructuring/scheme approved by a foreign court. Although there are decisions at first instance touching on common law recognition and assistance in the context of Mainland bankruptcy restructuring proceedings, the court has not in those decisions analysed and provided its detailed reasoning on the issue as it was not necessary to decide the issue in those applications. Given the vast number of applications for recognition and assistance coming to our court and the importance of the issue, it would be desirable for the court to consider the issue from first principles, with a view to developing the law in this area in a coherent and principled manner. Second, the need for recognition and assistance was said to be to assist the Administrators in overcoming the difficulties they had encountered in taking control over the Company’s assets in Hong Kong: However, the fact remains that the Administrators were perfectly able to (and they did) take steps to take control of USUM HK and commence or defend legal proceedings in the name of USUM HK in Hong Kong. Although Mr Tu challenged the authority of the Administrators and disputed the validity of the Form ND2A, the obvious thing for the Administrators to do would be to produce the orders made by the Chongqing Court including the order appointing them to office to demonstrate to the court and the CR that the Administrators are, as a matter of PRC law (which is the governing law of the Company), the only persons authorised to act on behalf of the Company including taking control over its assets. In view of the stance taken by Mr Tu, it would be necessary for the Administrators to obtain a determination on their authority to act on behalf of the Company in HCMP 118/2025 so as to resolve the issue once and for all. Asking the court to make a recognition order in these proceedings (which was brought and continued on an ex parte basis) would not assist the Administrators as the order would not bind Mr Tu, who is not a party to these proceedings. Third, the identity of the Administrators should be better defined. The order appointing the Administrators to office referred to 2 law firms and 36 individuals. For the sake of clarity and certainty, particularly when their authority has been challenged, it would be more expedient for the Administrators to designate one or 2 individuals as authorised representatives of the Administrators for the purposes of performing their duties in Hong Kong. The application was adjourned to allow the Administrators to address the above issues. After the adjournment, the Administrators urged the court to deal with the application on an urgent basis on the grounds that (1) the inter-governmental working group tasked with resolving the financial predicament of the 13 Companies had directed the Administrators to accelerate the implementation of the Restructuring Plan and complete all outstanding steps by 31 December 2025; (2) the view of the creditors who wanted to see the Company’s assets be realised by the end of 2025; and (3) the receivers appointed over several subsidiaries of ListCo had invited expression of interest in relation to a potential investment opportunity in one of the most valuable underlying assets of ListCo which would close on 21 November 2025. It was difficult to see how determination of the application would enable the Administrators to complete the sale and transfer of the Company’s assets located in Hong Kong by the end of December 2025 in view of the challenge raised by Mr Tu. More importantly, there was no urgent need to complete the sale and transfer of the Company’s assets to Pingying given that on 10 November 2025, the 13 Companies had resolved to terminate the Agreements made with Pingyang and cancelled its qualification as an investor of the Restructuring Plan. The Administrators would have to look for new investors, conduct negotiations and enter into new investment agreement before they need to transfer the Company’s assets in Hong Kong to the new investor. To accommodate the diary of counsel and of the court and the appointment of amici, the hearing was fixed on 20 January 2026. B3. General principles as explained in Singularis The principles governing an application for recognition and assistance of foreign insolvency proceedings are well-established. As explained by the majority of the Judicial Committee of the Privy Council in Singularis: The overarching principle is one of modified universalism, that the court has power to assist foreign winding up proceedings “so far as it properly can” (Singularis §§15, 19, 33, 112, citing and explaining Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508, §§16-22, Re HIH Casualty and General Insurance Ltd [2008] 1 WLR 852, §§6-8, 30 and Rubin v Eurofinance SA (Picard intervening) [2013] 1 AC 236, §§16-20). The justification for the principle is public interest in the ability of foreign courts exercising insolvency jurisdiction in the place of the company’s incorporation to conduct an orderly winding-up of its affairs on a worldwide basis, notwithstanding territorial limits of their jurisdiction. The basis of the public interest is comity and the fact that it is in the interests of every jurisdiction that companies can be wound up in an orderly fashion on a basis that is recognised and effective internationally (Singularis §23, citing HIH §6). The domestic/assisting court does not have the power to do at common law everything it could have done in a domestic insolvency. There is a distinction between (a) developing the common law having regard to the statutory framework for domestic insolvency which is an established part of the judicial function and (b) applying the statutory regime governing domestic insolvency by analogy to foreign insolvency (on a “as if” basis), which is a “usurpation of the judicial function” (Singularis §§18, 90-106, 111-112, cf. Cambridge Gas §§16, 61-93, 107-108). The domestic/assisting court does not have jurisdiction over the parties simply by virtue of its power to assist; it remains necessary to show the existence of an enforceable judgment in rem or in personam (Singularis §§18, 89, citing Rubin §§10, 102-132). On the basis of the above principles, Lord Sumption in Singularis explained the scope of the court’s powers to recognise and assist foreign liquidators at common law as follows: Even without recourse to the principle of modified universalism, as a matter of ordinary principles of private international law, the court will recognise the vesting of a company’s assets in an agent or office-holder appointed or recognised under the law of its incorporation (§12). Where the office-holder is appointed by a foreign court, the domestic/assisting court may provide assistance to the liquidator under common law. How far it is appropriate for the domestic court to develop common law so as to recognize an equivalent power does not admit of a single, universal answer, and depends on the nature of the power that the court is being asked to exercise (§19). However, even if the court is satisfied that it has an equivalent power in common law (based on established case law or permissible judicial development the common law to provide for it), such power is limited in 4 respects (§§25, 28-29): First, such powers are available only to assist the office-holders of a foreign court of insolvency jurisdiction or equivalent public officers. Second, it is a power of assistance and exists for purposes of enabling those courts to surmount problems posed by the territorial limits of each court’s powers, so it is not available to enable the officer-holders to do what they could not do under the law by which they were appointed. Third, such powers are available only where necessary for the performance of the officer-holders’ functions. Fourth, such powers must be consistent with the substantive law and public policy of the domestic/assisting court. For example, common law powers of disclosure would not be a permissible mode of obtaining information for use in actual or anticipated litigation, and the making of such order would be conditional on the applicant paying reasonable costs of compliance by the third party. The court would not make an order for assistance if the above criteria (or limits to the power) are not satisfied: In Singularis, the Privy Council set aside the order for assistance made by the Bermuda court (domestic/assisting court) on the basis that although there was power in common law (based on analogy to the Norwich Pharmacal jurisdiction) for Bermudan court to order a third party to disclose its own documents which contained information relating to the company, the order for assistance was not one which could have been made by the Cayman court (foreign court): “It is right for the Bermuda court, within the limits of its own inherent powers, to assist the officers of the Cayman court to transcend the territorial limits of that court’s jurisdiction by enabling them to do in Bermuda that which they could do in the Cayman Islands. But the order sought would not constitute assistance, because it is not just the limits of the territorial reach of the Cayman court’s powers which impede the liquidator’s work, but the limited nature of the powers themselves” (§29). Similarly, in Kireeva v Bedzhamov [2025] AC 812, a Russian trustee-in-bankruptcy sought assistance from the English court to recover a real property owned by the bankrupt in London. The application for declarations and appointment of receivers over the property were dismissed on the basis that under English substantive law, real property is governed by lex situs and did not vest in the Russian trustee-in-bankruptcy upon her appointment. The court’s common law power did not permit the English court to provide assistance which is inconsistent with its substantive law (§§25-36, 69, 84-111). The approach as explained in Singularis has been applied in Hong Kong where foreign office-holders seeking recognition and assistance are required to satisfy the following criteria (Guangdong Overseas §17(2); Re 上海昇奕科城实业有限公司 [2025] HKCFI 1744, §21: The foreign proceedings are “collective insolvency proceedings”; The foreign proceedings are conducted in the jurisdiction of the company’s place of incorporation or COMI; The assistance is necessary for the administration of the foreign winding-up or the performance of the office-holder’s functions; and The order is consistent with the substantive law and policy of the domestic/assisting court. A standard form of order has emerged which provides for (1) recognition of the foreign liquidation and the appointment of the foreign office-holder, together with (2) the specific powers that the office-holder has and may exercise within the jurisdiction, which normally includes the power to receive information and documents from third parties and to secure assets of the company within Hong Kong (Guangdong Overseas §24; 上海昇奕科城 §29). The order is substantially similar to the one set out in the Practical Guide for the “Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region” issued on 14 May 2021 (“Cooperation Mechanism”). B4. Expansion to voluntary winding up and COMI As submitted by Ms Sit, the Hong Kong court has expanded the scope of granting recognition and assistance beyond those set out in Singularis in 2 respects. First, recognition and assistance was granted to liquidators of company in voluntary winding-up commenced by a shareholders’ resolution on insolvency ground: In Re Supreme Tycoon Ltd [2018] 1 HKLRD 1120 §§9-18, Harris J observed (§15) that “what matters for cross-border insolvency assistance is not whether the foreign insolvency officeholder is or is not an officer of the foreign court. What matters is whether the foreign proceeding is collective in nature, in the sense that it is ‘a process of collective enforcement of debts for the benefit of the general body of creditors’. It is with collective insolvency proceedings that the principle of modified universalism is concerned”. This is to be contrasted with the approach in Singularis §25, where Lord Sumption said that the power to assist would not be available to assist a voluntary winding up, which is essentially a private arrangement, and although subject to the directions of the court, is not conducted by or on behalf of an officer of the court. It seems to me that the question whether the power of recognition and assistance can be extended to voluntary winding up warrants further judicial consideration. It is not necessary to consider the issue in this case given that the Administrators were appointed by the Chongqing Court. Second, recognition and assistance was granted to office-holders appointed by the court in the company’s COMI, which was not the place of incorporation (Re Lamtex Holdings Ltd [2021] 2 HKLRD 177 §§19, 22, 26; Re Global Brands Ltd [2022] 3 HKLRD 316 §§27-42). I respectfully agree with the reasoning in Lamtex and Global Brands for extending the power to cover the company’s COMI. I note that this is consistent with the approach adopted by the courts in other jurisdictions when dealing with applications for recognition and assistance of foreign liquidators: In Re HIH §31, Lord Hoffmann suggested that it might in some circumstances be appropriate to regard some jurisdiction other than that of the company’s place of incorporation as the appropriate seat of the principal liquidation (see also Dicey §30-146). In Re Opti-Medix Ltd [2016] SGHC 108, the Singapore court recognised Japanese insolvency proceedings in respect of 2 BVI incorporated companies, on the basis that in cross-border insolvency, there had been a general movement away from the traditional, territorial focus on the interests of the local creditors, towards recognition that universal cooperation between jurisdictions was a necessary part of the contemporary world. The court accepted that identifying the COMI as the place to conduct principal insolvency proceedings had much to commend it as a matter of practicality. The COMI was the place where the bulk of the business was carried out and consequently provided a strong connecting factor. Similarly, in Re China Agrotech Holdings Ltd, FSD 157 of 2017 (NSJ), the Cayman court also granted recognition and assistance at common law to liquidators appointed in Hong Kong over a Cayman-incorporated company. In my view, the extension of recognition and assistance to office-holders appointed by the court of the company’s COMI accords with commercial reality. Very often, the place of incorporation of the companies, particularly those incorporated in the offshore jurisdictions such as the BVI, Cayman Island and Bermuda, are only required to maintain their registered office address and share/directors registers within the jurisdiction. There is no requirement that their management, business and assets have to be located in the jurisdiction. Indeed, this is particularly relevant to Hong Kong as many offshore-incorporated companies are listed on HKEx. In respect of these offshore-incorporated listed companies, very often, they conducted fund-raising activities in Hong Kong and their management (or at least part of it unless exempted by HKEx) is based in Hong Kong (the latter is required by the Listing Rules, see Re Up Energy, §§47-48). If the court considers that the 3 “core requirements” (or 3 threshold requirements) for the court to exercise its discretionary jurisdiction in making a winding up order against the foreign companies are satisfied, a winding up order can be made, and the liquidation will be carried on as “ancillary” liquidation even though the substantive administration of the liquidation will be conducted in Hong Kong (Re Up Energy, §§74-75, citing Re BCCI (No. 10) [1997] Ch 213, at 238G-246F). B5. Delineation between recognition & assistance and applicable criteria Ms Sit submits (and Mr Maurellet agrees) that in the interests of clarity and to further assist the insolvency practitioners in deciding whether or not to apply for recognition and assistance, the court may add to the criteria the following matters. First, to delineate between recognition and assistance and the criteria which relate to each of them. This stems from the conceptual distinction between recognition and assistance: Recognition of the fact of a foreign office-holder’s appointment and his powers over the company’s affairs is a matter of ordinary private international law principle (Singularis §12). Provided the relevant criteria are satisfied in relation to the office-holder’s appointment, his ability to act as such within Hong Kong is not dependent on his first obtaining an order from the Hong Kong court (A Co v B §§3-6, Bay Capital §§10-11). The order for recognition is only confirmatory in nature for the benefit of third parties in Hong Kong with whom the office-holder may have to deal (Re Ping An Securities Group (Holdings) Ltd [2012] 2 HKLRD 204 §13). On the other hand, assistance refers to the grant of specific power by the domestic/assisting court in furtherance of the office-holder’s functions (such as orders for disclosure from third parties or stays of proceedings). Once the distinction is properly delineated, it may dispel any misconception that foreign office-holders require recognition of the foreign liquidation or their appointment before they can exercise their powers in dealing with the affairs and assets of the company in Hong Kong. In most instances, it would be sufficient for the office-holders to produce the relevant court orders to demonstrate that they have been appointed by the foreign court, and they have authority to act on behalf of the foreign company which has been placed in liquidation. It is only if their appointment is challenged or that it would be cumbersome, costly and time consuming to prove their authority to act on behalf of the company (such as where there are many third parties which the office-holders need to deal with and such third parties are not satisfied by the orders produced) that it would be necessary for the office-holders to seek recognition of the foreign liquidation proceedings and their appointment from the Hong Kong court. Second, to assist the court’s determination of the application in an expeditious manner, the foreign office-holders should in their application identify (as apparent from Singularis §12) the relevant judgment or order appointing them to office, and state that it is one which the court would enforce under ordinary conflict of laws principle. This reflects the law that not all appointments of foreign insolvency office-holders under the law of the company’s place of incorporation or COMI would invariably be recognised by the court. Rather, the court has a discretion to refuse to give effect to foreign insolvency proceedings if (a) to do so would be contrary to public policy, (b) the foreign proceedings constitute a fraud or are in breach of natural justice, or (c) there is an attempt to enforce a foreign penal or revenue law (Sheldon, Cross-Border Insolvency, 4th ed, Ch 11; HKIE v Aoki [2024] 2 HKLRD 760 §§149-155). If the appointment is made by a foreign court where the company’s COMI is located and that jurisdiction is not the place of incorporation of the company, the office-holders should identify and explain the factual basis for saying that the orders are made by the court of the company’s COMI and, where applicable, it is the jurisdiction where the liquidation (or a substantial part thereof) has been conducted. Third, as regard the criteria for assistance, apart from the limiting principles discussed in Singularis §25 (which are materially the same as the factors discussed in §46 above), the office-holders should state (1) the relief sought by the office-holder is one which the court has power to grant at common law and cite authorities to show the existence of such power, and (2) the relief is one which the foreign court could have made. Fourth, where the office-holders are only seeking recognition of their appointment and confirmation that they have the powers under the foreign law, they should in the application seek an order which merely provide for recognition of their appointment and their powers under foreign law. It is incumbent upon the office-holders to demonstrate that they do have the powers under the terms of his appointment. This includes identifying the relevant statutory provisions which confer the powers on the office-holders and the orders appointing them to office. If the sources of powers and statutory provisions have already been identified and set out in the letter of request issued to the Hong Kong court, it may be sufficient for the office-holders to produce the letter of request. If the foreign office-holders are only seeking recognition of their appointment, the court would not need to consider and grant any further positive act of assistance. Thus, the principles for granting assistance (§44(1)-(3) above) do not come into play. The criteria for recognition and assistance may be summarised as follows: The court may recognise the appointment of a foreign insolvency office-holder where: The foreign proceedings are collective insolvency proceedings; The foreign proceedings are conducted in the jurisdiction of the company’s place of incorporation or where its COMI is located; and Recognition is not barred on grounds of public policy, fraud or breach of natural justice, or the enforcement of foreign penal or revenue laws. The court may grant assistance to a foreign insolvency office-holder where: The appointment of the foreign insolvency office-holder is recognised under Hong Kong law; The power which the office-holder invites the court to exercise or confer is of a nature which the court has recognised at common law or which is proper for the court to exercise having regard to the proper exercise of the judicial function; The order sought is one which can be made under the law by which they were appointed; The assistance is necessary for the administration of the foreign winding-up or the performance of the office-holder’s functions; and The order sought is consistent with the substantive law and policy of the Hong Kong court. B6. Recognition of foreign restructuring/scheme I shall first consider whether the court has power under common law to recognise a restructuring/scheme approved by a foreign court. Within this issue, it seems to me that there are 2 separate questions as to whether the court has power under common law to recognise: A restructuring/scheme (or the specific terms thereof) in respect of a foreign company which has been approved by, or subject to the supervision of, a foreign court; and The foreign office-holders appointed by a foreign court for restructuring purposes. As a matter of principle, the court has power under common law to recognise and assist foreign proceedings that are “collective insolvency proceedings”, such power should be available where the foreign restructuring/scheme falls within that description. There are 4 main reasons for this. First, at the core of this area of law is to determine who may act on behalf of a company as a matter of private international law principles (Dicey §30-145; Singularis §12). The general rule of private international law is that matters of corporate existence, capacity, internal management and dissolution are to be governed by the lex incorporationis (Dicey §§30R-020-30-031, Sheldon §6.30). Thus, subject to considerations of public policy and other related bars, there is no principled reason for distinguishing between a foreign representative appointed for purposes of restructuring and one appointed for purposes of liquidation, at least where such appointments are made under the lex incorporationis. There is no in-principle limitation of the scope of recognition of court-appointed representatives to liquidators. This can be seen from the authorities where the English courts recognised receivers appointed by the court of the place of the incorporation of the company (Macaulay v Guaranty Trust Co of New York (1927) 44 TLR 99, 100; International Credit and Investment Co (Overseas) Ltd v Adham [1994] 1 BCLC 66, 71). Reference can also be made to the law of bankruptcy, where it is established that the court will recognise any bankruptcy in a foreign country as being an assignment of all movables to the trustee, assignee, curator, syndic or others “who under the law of that country are entitled to administer the debtor’s property” if that is its effect under the foreign law (Dicey §31-087). The commentary in Dicey §31R-086, fn 237 goes on to explain that “the word ‘bankruptcy’, as applied to a foreign country, is here used in its widest sense, and includes any proceeding, whatever its name, by which, under the authority of a court, the property of an insolvent debtor is distributed among their creditors”. This points to the absence of any conceptual limit to the court’s power to recognise foreign court-appointed administrators of corporations and individuals at common law. Second, there is no reason in principle why the domestic/assisting court should not extend its recognition and assistance to restructuring proceedings, at least where it is one which extends to all creditors subject to the jurisdiction of the foreign court: There is no exhaustive definition of what constitute “collective insolvency process”. Liquidation, which has been described a process of collective enforcement of debts for the benefit of the general body of creditors (Re Line Bros Ltd [1983] Ch 1, 20; Supreme Tycoon §15), is a collective insolvency process. Thus, if the foreign restructuring proceedings are collective in nature, there is no reason in principle as to why the domestic/assisting court should not extend its recognition and assistance to such proceedings. In the context of Chapter 11 proceedings under the US Bankruptcy Code, which allow a company unable to meet its liabilities to seek protection of the court and to carry on business with the intention of rehabilitation, primarily for the benefit of all creditors, the Hong Kong and English courts have accepted that such proceedings are capable of falling within the domestic court’s power of recognition and assistance (Modern Terminals (Berth 5) Ltd v States Steamship Co [1979] HKLR 512, 514; Cambridge Gas). The bankruptcy restructuring proceedings commenced and implemented under the supervision of the courts in Mainland China bear similar features as orthodox insolvency proceedings, both in terms of the criteria for commencing proceedings and the nature of the office-holder’s powers. As stated in the legal opinion of Mr Wu Jian: As a matter of PRC law, bankruptcy restructuring proceedings can be initiated under EBL where the company is unable to repay its debts as they fall due and its assets are insufficient to repay all its debts or clearly lacks the ability to repay (§2(1)). The purpose of bankruptcy restructuring proceedings is to resolve all debts on a collective basis by prohibiting satisfaction and enforcement outside the scope of those proceedings (§5(1)). The Administrators are appointed to control the assets of the Company. They are authorised to take possession of the Company’s assets, corporate seal, accounts and documents (§§3(1), 3(2)(1)). The Administrators act under the supervision of the creditors and the Chongqing Court (§§3(3), 5(2)). The proceeds of the Restructuring Plan would be distributed to the creditors in proportion to their claims (§§5(2), (4)). The same conclusion has been reached in Re HNA Group Co., Ltd [2021] HKCFI 2897 §§7-8; Re China Electronics Leasing Ltd (In Liq) [2024] 5 HKLRD 805 §§6, 14; Nuoxi Capital Ltd (in liq) v Peking University Founder Group Co Ltd [2022] 2 HKC 1 §§48-51 where Hong Kong court accepted that the reorganization proceedings under EBL are collective insolvency proceedings. Third, there is no public policy militates against the court recognising foreign restructuring proceedings: It has been observed that public policy as a factor against recognition should be a “last resort, only prayed in aid to prevent an otherwise unavoidable and gross injustice”, and recognition cannot be denied simply because the foreign law is strikingly different or where the foreign court has misapprehended the bankruptcy law of the English court (Sheldon §11.3). In Hong Kong, an aspect of public policy relevant to the court exercising the power to recognise a foreign court-supervised moratorium or restructuring is the absence of an equivalent regime under Hong Kong law. It seems to me that the unavailability of a court-supervised moratorium procedure under Hong Kong law should not preclude recognition of foreign office-holders appointed by court for corporate rescue purposes given that the Government has long recognised the need for, and has prepared draft corporate rescue bill which was supposed to be placed before the Legislature in the 2020/2021 session. This was subsequently withdrawn from LegCo due to other pressing legislative needs that took priority over the draft bill. Nor do I consider the limited scope of the court’s power under s.193 of CWUMPO change the analysis. While the Court of Appeal in Re Legend International Resorts Ltd [2006] 2 HKLRD 192, §§35-36 held that provisional liquidators cannot be appointed under s.193 of CWUMPO for the sole purpose of achieving a moratorium or facilitating a corporate rescue, such holding was reached as a matter of statutory construction. It does not give rise to any public policy concern against recognising foreign restructuring proceedings. There is no inconsistency between the unavailability of court-supervised moratorium under Hong Kong insolvency procedure and recognition of office-holders appointed under foreign corporate rescue procedure since ex hypothesi, the latter does not involve any Hong Kong insolvency process. I note that the courts in other jurisdictions adopted the same approach. In Re IIT (1975) 8 OR 359, the Ontario High Court of Justice recognised liquidators over a Luxembourg “indivision” which had no parallel under domestic law. In HIH, the House of Lords authorised English assets to be remitted to Australia notwithstanding that the order of distribution of assets in Australia (regarding preferential creditors) differed from that under English law. Fourth, as pointed out by Mr Maurellet, recognition and assistance of foreign restructuring proceedings by domestic court is not unprecedented as can be seen in the following authorities. Although none of these authorities appears to have delved into any in-depth discussion as to the issues raised in the present case: In Banque Indosuez SA v Ferromet Resources Inc [1993] BCLC 112, the plaintiff bank had obtained interlocutory injunctions against defendants in 2 actions. The first defendant in the first action (“Inc”) is a Texas company. On the same day as the injunction application in the English Court, 5 bank creditors (including the plaintiff bank) filed in the Bankruptcy Court for the Southern District of Texas for involuntary bankruptcy of Inc under Chapter 11 (115g). In discharging the injunctions, Hoffmann J (as he then was) held (117i-118a) that: “[t]his court is not of course bound by the stay under United States law but will do its utmost to co-operate with the United States Bankruptcy Court and avoid any action which might disturb the orderly administration of [the 1st defendant] in Texas under ch 11. This court has jurisdiction to make interlocutory orders for the preservation of [the 1st defendant’s] property in this country by way of assistance to the United States Bankruptcy Court but no such assistance has been requested here. So far as the evidence shows, these [local] proceedings are the individual act of a single creditor and, if successful, would enable that creditor to secure some of [the 1st defendant’s] assets outside the United States bankruptcy process. [Counsel for the plaintiff bank] said that these proceedings had been taken with the consent of the other banks but a private sharing arrangement of that kind is no substitute for administration in accordance with the law of the jurisdiction seised of the bankruptcy”; it was concluded at 118g that “In my judgment, therefore, the bank can be adequately and sufficiently protected by applications in the ch 11 proceedings which it has started in Texas. If the United States court requires the assistance of this jurisdiction, I am sure our courts will be willing to help. But I see no need for independent action. The injunctions will be discharged” (underlined added). In Modern Terminals, Trainor J recognised US Chapter 11 proceedings and stayed execution in Hong Kong. The learned Judge found (at 521) that Chapter 11 proceedings “are intended to be the legislature primarily for the benefit of all creditors while at the same time affording an insolvent corporation the opportunity to recuperate” and held that “there is a position analogous to the ‘process of universal distribution’”. A stay of execution was granted to facilitate the Chapter 11 reorganisation. In Aoki Corp, Reyes J recognised Japanese civil rehabilitation proceedings which were restructuring in nature, aimed at “the rehabilitation of a debtor’s business or economic well-being by giving legal effect to a restructuring plan” (§109). After citing Galbraith, Banque Indosuez and Modern Terminals, the learned Judge imposed terms on enforcement “for the purpose of giving due recognition to the Japanese rehabilitation proceedings as a matter of comity and fairness” (§141(2)). The learned Judge endorsed a “useful checklist...of the factors which a Court should take into account in deciding whether a foreign corporate restructuring process should be recognised domestically” (§§152-153). In Felixstowe Dock & Railway Co v United States Lines Inc [1989] QB 360 (discussed in Aoki Corp, §§136-139), Hirst J (as he then was) considered the effect of US Ch 11 reorganisation proceedings in the context of Mareva injunctions obtained by English creditors over assets in England. Although the case was primarily concerned with whether Mareva injunctions should be discharged in light of the US Bankruptcy Court's restraining order, Hirst J proceeded on the assumption that common law recognition could be accorded to the Chapter 11 restructuring proceedings. Specifically, the learned Judge observed (378G-379A) that “I wish however to stress that the court would in principle always wish to co-operate in every proper way with an order like the present one made by a court in a friendly jurisdiction... But whether this is appropriate in any given case, and if so the precise nature and extent of such co-operation, must depend on the particular sphere of activity in question and the English law applicable thereto...”. The decision makes clear that Chapter 11 proceedings are capable of recognition under common law. Galbraith was also referred to in passing at 378H-379D. There are also recent Hong Kong decisions recognising Mainland bankruptcy restructuring proceedings (albeit without addressing the issues at hand): Re HNA Group [2021] HKCFI 2897 §§7-8; Re China Electronics Leasing Company Ltd, §§6, 17-18 and headnote; and Nuoxi v PUFG §§1, 69(2)-(3)). The position is also reinforced by leading academic commentaries: Professor Fletcher suggests in Insolvency in Private International Law, 2nd ed, (2005) §3.117 as “a basic rule of recognition” in the context of foreign corporate rescue procedures that “proceedings which have been commenced under the law of the company’s formation (or within a sister jurisdiction in the case of a federal system such as that of the United States) should be eligible for recognition”. Richard Sheldon QC commented in Cross-Border Insolvency, 4th ed (2015) §6.19 that “the principles should apply to all forms of foreign insolvency proceedings”, including “a reorganisation type of procedure which has as its aim the rehabilitation of the debtor or its business”. Philip R. Wood QC (Hon) states in Principles of International Insolvency, 3rd ed (2019) §52-033 that “at common law the English courts will recognise a foreign rehabilitation proceeding carried out under the laws of the company’s place of incorporation”, citing Felixstowe Dock and Modern Terminals. Dicey, Morris & Collins on the Conflict of Laws, 16th ed (2022) §§30-148 to 30-150 cites Felixstowe Dock and notes (§30-150) that there is limited guidance on “the extent to which” foreign corporate rescue schemes would be recognised—not on whether they could be recognised at all. B7. Power to assist (or give effect to) restructuring/scheme The more difficult question is whether the common law power extends to assisting or giving effect to a restructuring/scheme (or the terms thereof) approved by a foreign court. It seems to me that the following principles apply in considering whether to assist or give effect to such a restructuring/scheme. First, the statutory power to sanction a restructuring/scheme can only be exercised in respect of a company which falls within the power. In the case of Hong Kong, such power only extends to a company liable to be wound up under CWUMPO. The statutory power cannot be exercised in respect of a restructuring/scheme approved by a foreign court “as if” the foreign company had been placed in domestic liquidation or that it were a domestic scheme (Singularis §§18, 83-93 (discussing Cambridge Gas); Up Energy §§61-68). While there are authorities to suggest that the foreign office-holders (at the very least) bear the burden to satisfy the domestic court that the restructuring plan approved by the foreign court was reasonable and just and was obtained through due process (In Aoki Corp §151, Fletcher §3.116, Cambridge Gas §26), that requirement seems to be more onerous than the criteria for recognition under the Model Law, which empowers the court to recognise and give effect to a foreign restructuring/scheme if the restructuring proceeding was approved by the court where the company has its COMI (as a foreign main proceeding) or establishment (as a foreign non-main proceeding) and there was due process. Second, the domestic court will need to be satisfied of the Singularis limits (discussed in §44(3) above), including whether allowing such terms to be enforced would be consistent with domestic substantive law. This requires a deeper dive into the facts and reasoning of Cambridge Gas and the basis upon which it was held to be wrongly decided in Singularis. Cambridge Gas concerned a business which operated various ships, each held by a Manx SPV whose shares were held by a Manx management company which shares were held by Navigator, another Manx company (§§1-2). Navigator’s shares were substantially held by Cambridge Gas, a Cayman company (§3). The creditors petitioned for relief under Chapter 11, and the US Court confirmed a plan approved by the outside creditors for assets to be taken over by the creditors. A particular term of the plan (Art 22) provided for automatic vesting of all shares in Navigator in the shareholders of a new company to be established and held for the benefit of the creditors (§§4-5). Recognising that Art 22 could not automatically have effect under Manx law, the US Court issued a letter of request to the Manx court asking for assistance in “giving effect to the plan and the [US court] confirmation order” (§6). There was a finding of fact (not challenged on appeal) that Cambridge Gas (qua shareholder of Navigator) never submitted to the jurisdiction of the US court (§§7, 10). Thus, the US court had no in rem jurisdiction (because Navigator’s shares were sited in Isle of man) or in personam jurisdiction. Lord Hoffmann was clearly unimpressed by Cambridge Gas’ opposition which he considered to be “technical in the highest degree” (§8), and there was no evidence of any prejudice to Manx creditors (§21). He held that the principle of modified universalism was sufficient to confer jurisdiction on Manx court to assist by giving effect to the plan (§21), which allowed the Manx court to do whatever it could have done in the case of domestic insolvency and avoid the foreign office-holder having to start parallel insolvency proceedings in the domestic forum, notwithstanding under Manx Companies Act s.152 there was a power for Manx court to sanction a scheme of arrangement (§§22, 25, 26). Such reasoning posed difficulty. The Chapter 11 plan purported to transfer Manx shares (the shares in Navigator) in circumstances where the US court had no in rem jurisdiction over such shares, and the registered holder (Cambridge Gas) never submitted to its in personam jurisdiction. The legal question was whether such a foreign order (since the plan was confirmed by the US court) could be enforced in Isle of Man, and questions as to common law recognition and enforcement of foreign judgment would be brought into play. In Rubin §§103, 118, 132 and Singularis §§18, 83-93 the courts answered those questions and held that there was no common law power to recognize the order of the US court in such circumstances. These difficulties explained the position in §68 above (why domestic court cannot simply enforce the Chapter 11 plan “as if” a scheme had been brought in Isle of Man). Under common law, there was no basis for Manx court to enforce Art 22. If a scheme had been brought in Isle of Man and all the criteria were satisfied, that conferred jurisdiction on the Manx court (with the benefit of all the safeguards built into the statutory procedure) to override and divest Cambridge Gas of its proprietary interest in Navigator. Absent a Manx scheme, the Manx court simply had no jurisdiction to grant the assistance sought. None of the Hong Kong cases touching on common law recognition and assistance in the context of Mainland bankruptcy restructuring proceedings are inconsistent with the position in §68 above: In HNA, although the Mainland proceedings were (like the Restructuring Plan) brought under chapter 8 of EBL (§7), no plan was formed. The administrators only sought “standard” powers confirming that they have powers to act on behalf of the company (§5). No additional powers were sought and the issues in Cambridge Gas were not engaged. In China Electronic Leasing, while the Mainland proceedings were for bankruptcy restructuring (§6), the administrators were not seeking anything other than “standard” powers to recover certain bank balances belonging to the company in Hong Kong (§§7-8). Although this Court was not fully convinced of the need for such order (§19), it ultimately decided to grant those powers in the interest of the creditors (§20). In Nuoxi v PUFG, there were Mainland reorganization proceedings under EBL and a plan had been approved (§§7, 48). However the administrators were not seeking to enforce the plan in Hong Kong, but sought a stay of Hong Kong proceedings (of which there were 4 pending in which holders of keepwell deed with Hong Kong exclusive jurisdiction clauses sought to establish their entitlement as creditors of the company) (§§13, 15, 17). Harris J refused to grant any stay in respect of the 4 pending Hong Kong proceedings, but was prepared to grant a general stay under O.12, r.8 (carving out those 4) on the basis that Art. 21 of EBL requires all claims commenced against a company subject to bankruptcy proceedings be commenced before the court that accepts the application for bankruptcy (§§52, 69). Thus, the issues in Cambridge Gas were not engaged. Third, the principles set out above are consistent with and can be fully accommodated under the Cooperation Mechanism. Even though this case does not fall within the Cooperation Mechanism, the source of the Hong Kong court’s jurisdiction under the Cooperation Mechanism is still common law, and there is no principled distinction between Mainland courts in the Pilot Areas and elsewhere, when they invoke “bankruptcy … reorganisation and compromise proceedings under the [EBL]” (Record of Meeting cl. 3). C. PRESENT APPLICATION Ms Sit points out that while the Administrators have framed their application as one for “recognition and assistance” and the latest draft order seeks an order that the “bankruptcy restructuring in the People’s Republic of China of [the Company] … be recognized”, on true analysis: The Administrators are merely seeking recognition of their appointment, i.e. declarations of their status as agents of the company and their ability to deal with the assets of the company. The Administrators do not ask the court to assist or give effect to the Restructuring Plan (or the terms thereof) as a matter of Hong Kong law, such as by recognising the extinguishment of debts owed to creditors in Hong Kong or vesting assets in third parties, which raises separate issues discussed above. The latest draft order removes all references to the Administrators taking possession of the shares in Listco, which do not belong to the Company and is the subject of pending disputes before the Hong Kong court. Mr Maurellet confirms that the Administrators only seek recognition of their appointment and the powers they have under EBL such that only the criteria for recognition (as described in §59(1) above) need to be considered by the court. For the reasons explained below, all the criteria for recognition are satisfied: Collective insolvency proceedings: The consolidated restructuring proceedings in respect of the 13 Companies (including the Company) are collective insolvency proceedings, being a court-supervised insolvency process intended to regulate the rights of creditors of companies that are insolvent. As explained in the legal opinion, the bankruptcy restructuring procedure under EBL is a collective repayment process characterised by: (i) mandatory and unified treatment of the debtor’s assets, which cannot be privately disposed of; (ii) requirement that all creditors be repaid according to unified rules, with individual repayment prohibited; and (iii) determination of repayment order and proportion according to law, ensuring equal treatment of creditors within the same class, with the ultimate objective of fairly repaying creditors through an orderly collective process. As confirmed by the Chongqing Court, the consolidated restructuring proceeding is an insolvency proceeding triggered by the company’s inability to pay. As the Chongqing Court found, although the Company's assets exceeded its liabilities, it had significant unpaid debts under enforcement; the cash fund of RMB 113,096.52 was not sufficient to pay the debts fallen due; and the Company had encountered difficulty in timely realisation of other assets, poor liquidity, and clear lack of ability to pay debts. Jurisdictional connection: The consolidated restructuring proceedings are brought in the Company’s place of incorporation, which is also the Company’s COMI. Public policy: There is no public policy concern that would warrant declining recognition. The consolidated restructuring proceedings have been conducted under the ongoing supervision of a competent court. The process involved proper notice given to the creditors, and the creditors had the right to attend meeting for the purpose of considering and approving the Pre-Restructuring Agreement and the Restructuring Plan. Throughout the process, the Chongqing Court exercised supervision in accordance with EBL. The Administrators seek recognition purely to implement a court-approved Restructuring Plan for the benefit of the creditors as a whole. The Administrators do not seek any order which would have the effect of evading Hong Kong law or affecting the legitimate interests of any creditors. The Administrators have attempted to take control over USUM HK’s shares through the exercise of the Company’s shareholder rights in USUM HK but have not been able to do so without a recognition order. Necessity: The recognition order sought is necessitated by (a) the CR’s refusal to register the Form ND2A filed by Mr Xie and (b) the challenge raised by Mr Tu regarding the authority of the Administrators to act on behalf of the Company including taking control over its assets in Hong Kong (i.e. the 100% shareholding in USUM). The combined effect of these is that the Administrators have not been able to obtain control over USUM HK and its assets (i.e. shares in ListCo), both of which are the only outstanding matters to complete the implementation of the Restructuring Plan. As regards the terms of the order, Ms Sit makes the following points: Recognition of Restructuring Plan and the Administrators (latest draft order §1): As the Administrators seek declaratory relief recognising their status, they need to demonstrate the usual discretionary factors for the grant of declaratory relief including the utility of the order sought and delay. It may be desirable to make clear that the Restructuring Plan are only recognised in Hong Kong to the extent of the appointment of the Administrators. This may be done by limiting the recognition to the Appointment Order. Declaration of Administrators’ powers (latest draft order §2): the function of this paragraph is to declare the Administrators’ powers under the terms of the Appointment Order. It is necessary for the Administrators to justify each provision of this paragraph by reference to the evidence regarding the scope of their powers under EBL to the extent that they have not been confirmed by the Chongqing Court in the Letter of Request. The Administrators pray in aid the difficulties which they have encountered in exercising control over USUM HK and transferring the shares in ListCo due to litigation or complaints brought by Mr Tu. But Mr Tu is not a party to these proceedings and would not be bound by any findings or orders made by the court. In any event, Mr Tu’s challenge to the Administrators’ authority to act on behalf of the Company may well be on the basis of grounds and evidence not before the court in the present proceedings, and it is not possible for the Administrators to short-circuit any such challenge by way of these ex parte proceedings. It is unclear whether it is necessary for declarations of the Administrators’ powers to receive information and documents regarding the Company and/or to take possession of the Company’s books and records in Hong Kong (latest draft order §§2(a), 2(c)), when (i) they would already have those powers qua agent of the Company, (ii) there is no suggestion that they need to exercise such powers in Hong Kong and (iii) there is no suggestion that the Administrators have or would encounter any difficulties in exercising these powers in Hong Kong which such a declaration would resolve. The Administrators have not made good their entitlement to take into possession “emails exchanged and other correspondence between the Company and its auditors, and the Company and other third parties” or “documents and information provided by the Company to its auditors and provided by the auditors to the Company in relation to the audit work” (latest draft order §§2(c)(i)-(ii)). That is a matter for the Administrators to justify. Execution of documents (latest draft order §3): Since the authority of the Administrators to act on behalf of the Company is a matter of PRC law, it would be necessary for the Administrators to justify this by reference to PRC law evidence. In the Letter of Request, the Chongqing Court has only authorised the Administrators to act by a seal bearing the words or by signature of an authorised representative of the Administrators (由管理人授权代表签字). The latest draft order, on the other hand, seeks a declaration that the Administrators may act through any one or more of 3 individuals (路少红, 王一静 and 王丹) affixing a common seal or affixing their signature. To avoid any potential inconsistency with the terms of their appointment, it may be preferable for the order to track precisely the wordings of the Letter of Request. Costs (latest draft order §5): Similar orders have been made by the court in previous applications for recognition and assistance (eg. Re Guangdong Overseas Construction Corp §24(6)) and the wording also tracks that contained in the Practical Guide. However, the provision may not be appropriate as a matter of principle given that: The Company is not a party to these proceedings and indeed not subject to the jurisdiction of the court. Since the Administrators are appointed by the Chongqing Court, their entitlement to costs as against the Company is prima facie a matter for the Chongqing Court. Insofar as such a costs order is premised on the priority for distribution of assets as a matter of EBL and/or the Administrators’ right to indemnity as an agent of the Company, no further order is required from the Hong Kong court. Mr Maurellet has taken on board the amici’s observations and revise the draft order, with justifications as follows: Recognition (§1): The Administrators confirm that recognition can be limited to recognition of the Chongqing Court’s appointment of the Administrators by express reference to the Appointment Order. The Administrators also have no objection to adding words to the effect that the order is without prejudice to other ongoing legal proceedings in Hong Kong (including proceedings brought by Mr Tu). Powers (§2): The Administrators agree that reference should be made to the powers they enjoy as administrators under EBL. The Appointment Order is the source of the Administrators’ powers and duties. The terms thereunder are identical to the powers provided under Article 25 of EBL. The Administrators will not seek the powers at §§2(c)(i)-(ii) of the latest draft order. The remaining powers in §2 are those which fall within the scope of the Appointment Order and Article 25 of EBL. A comparative analysis is illustrated in the table at Annex 2 hereto. Execution of documents (§3): The Administrators acknowledge the amici’s suggestion for §3 to mirror the wording of the Letter of Request to the extent possible. The Letter of Request is neutral as to the number of authorised representatives. The identification of 3 individuals in the draft order is to address the concern raised by this Court at the last hearing regarding potential confusion which may arise if the order simply refers to “authorised representative” generally, without identifying specific individuals. The Administrators are content for the order to identify the 3 named individuals (路少红, 王一静 and 王丹) as proposed, and are open to alternative formulation that achieve the same practical effect. Costs (§5): The Administrators note that costs orders of this nature have been made on various previous occasions as part of the “standard” order. However, upon further reflection, the Administrators agree with the amici that there is no principled reason why such an order must be made by the Hong Kong court as the court recognising the foreign insolvency proceedings, particularly given the potential disturbance to the priority of distribution under the foreign insolvency proceedings. As a matter of principle and going forward, if such an order is needed, it can be justified by evidence on a case-by-case basis. The Administrators confirm that no such order is needed in the present case, and are content for §5 to be omitted. Taking into account the concessions and revisions made by Mr Maurellet, this Court is satisfied that it is appropriate to grant a recognition in the following terms: The bankruptcy restructuring in the People’s Republic of China of the Company and the appointment of the Administrators, with the team of Administrators consisting of 路少红, 王一静and王丹 (with 王丹appointed as the responsible person) pursuant to the Order of the Chongqing No. 5 Intermediate People’s Court dated 7 February 2022 be recognised by this Court. For the avoidance of doubt, nothing in this Order shall prejudice any other proceedings in Hong Kong or the rights of any party therein; The Administrators have and may exercise in the Hong Kong Special Administrative Region the following powers: to request and receive from third parties all documents and information concerning the Company and its promotion, formation, business dealings, accounts, assets, liabilities, or affairs (including the cause of insolvency); to locate, protect, secure, take into possession and control all assets and property within the jurisdiction of this Court which the Company is or appears to be entitled, including but not limited to 6,851,000 issued ordinary shares (i.e. 100% shareholding) in USUM HK (a company incorporated in Hong Kong with Company No. 2150576); to locate, protect, secure, take into possession, and control the books, papers, and records of the Company, including the accounting and statutory records within the jurisdiction of this Court and to investigate the assets and affairs of the Company and the circumstances which gave rise to its insolvency; to take all necessary steps to prevent any disposal of the Company’s assets and, in particular, to secure any credit balances in any bank account(s) in the name or under the control of the Company within this jurisdiction; to operate and open, or close any bank account(s) in the name and on behalf of the Company for the purpose of recovering receivables and collecting the assets of the Company and paying the costs and expenses of the Administrators; to retain and employ barristers, solicitors and other attorneys, accountants and/or such other agents or professional persons as the Administrators consider appropriate for the purpose of advising or assisting in the execution of their powers and duties under this Order; so far as may be necessary to supplement and to effect the powers set out herein, 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; Anything that is authorised or required to be carried out by the Administrators may be effected by any one or more of 路少红, 王一静and王丹, either by affixing the seal bearing the words “Administrators of USUM Investment Group Limited” or by signature(s) of 路少红, 王一静and/or王丹 (as the case may be); and The Administrators do have liberty to apply. (Linda Chan) Judge of the Court of First Instance High Court Mr Jose Maurellet SC leading Mr Michael Lok and Mr Charlie Liu, instructed by Dentons Hong Kong LLP, for the Applicant Ms Eva Sit SC leading Mr Jonathan Fung, as amici curiae Revised Draft Order §2 EBL Article 25 Power 2(a) Request and receive from third parties all documents and information concerning the Company and its promotion, formation, business dealings, accounts, assets, liabilities, or affairs (including the cause of insolvency) (1) To take possession and control of the debtor’s property, seals, account books, documents and other materials; (2) To investigate the debtor’s financial condition and prepare a report on its financial status 2(b) Locate, protect, secure, take into possession and control all assets and property within the jurisdiction of this Court which the Company is or appears to be entitled (1) To take possession and control of the debtor’s property, seals, account books, documents and other materials; (6) To manage and dispose of the debtor’s property 2(c) Locate, protect, secure, take into possession, and control the books, papers, and records of the Company, including the accounting and statutory records within the jurisdiction of this Court and to investigate the assets and affairs of the Company and the circumstances which gave rise to its insolvency (1) To take possession and control of the debtor’s property, seals, account books, documents and other materials; (2) To investigate the debtor’s financial condition and prepare a report on its financial status 2(d) Take all necessary steps to prevent any disposal of the Company's assets and, in particular, to secure any credit balances in any bank account(s) in the name or under the control of the Company within this jurisdiction (1) To take possession and control of the debtor’s property, seals, account books, documents and other materials; (6) To manage and dispose of the debtor's property 2(e) Operate and open, or close any bank account(s) in the name and on behalf of the Company for the purpose of recovering receivables and collecting the assets of the Company and paying the costs and expenses of the Administrators (1) To take possession and control of the debtor's property, seals, account books, documents and other materials (3) To determine matters concerning the internal management of the debtor; (4) To determine the debtor’s daily expenditures and other necessary expenses; (6) To manage and dispose of the debtor’s property 2(f) Retain and employ barristers, solicitors and other attorneys, accountants and/or such other agents or professional persons as the Administrators consider appropriate for the purpose of advising or assisting in the execution of their powers and duties under this Order (3) To determine matters concerning the internal management of the debtor 2(g) So far as may be necessary to supplement and to effect the powers set out herein, 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 (7) To represent the debtor in litigation, arbitration or other legal proceedings