On June 24, 2022, Honorable Justice Harris (of the High Court of the Hong Kong Special Administrative Region) granted assistance to the Cayman Islands appointed Joint Provisional Liquidators (the “JPLs”) of Seahawk China Dynamic Fund, a solvent company incorporated in the Cayman Islands. Islands (the “Company”). Harris J ruled that JPLs have the power to act as agents of the company in Hong Kong. The reasons were rendered on July 4, 2022.
Hong Kong’s decision is expressly based on common law principles of conflict of laws, as opposed to principles of cross-border insolvency. In providing assistance to JPL, Harris J reiterated the following uncontroversial proposal from Re Grand Peace Group that:
“[A]In matters of Hong Kong law, matters concerning the incorporation and management of the affairs of a foreign company are generally determined by the laws of the place of its incorporation.”
It is important to note that Justice Harris confirms that the question of whether or not a foreign liquidator has the right to represent a particular company (i.e. in the same way as its board of directors) and to Acting as its agent in another jurisdiction is subject to the law of the place of incorporation. The judge also clarified that deciding the question of the center of main interests (“COMI”) of the company concerned is moot if the liquidator of a solvent company seeks an order confirming that he has special powers by virtue of an appointment at the place of incorporation of the company.
A link to the Hong Kong decision is here.
The JPLs (Eleanor Fisher, Anita So and Tsui Chi Chui of EY) were appointed by the Grand Court of the Cayman Islands on February 10, 2022 to protect and preserve the value of the Company’s assets pending the ruling on the proceedings contested liquidations. in the Cayman Islands (the “Cayman procedure”). The Cayman proceeding concerns a petition brought by the majority shareholder of the company (which is a solvent open-end fund) asking that the company be liquidated on the grounds that it is just and equitable to do so. There are also related substantive proceedings in Hong Kong relating to much of the same underlying contentious issues (the “Hong Kong Procedures”).
On February 21, 2022, the Grand Court of the Cayman Islands issued a Letter of Request to the Hong Kong High Court, requesting that the JPL appointment be recognized in Hong Kong to the fullest extent permitted by Hong Kong law.
The Hong Kong Court granted JPL’s request and ordered that JPL have the same powers to act in the name and on behalf of the Company in Hong Kong as granted by the Cayman Court, except that JPL will not have the authority to bring legal action or make requests on behalf of the Company (including any request for ancillary relief such as freezing orders or search orders).
The Hong Kong Order grants the JPLs the power to secure and take possession of all of the Company’s assets within the jurisdiction of the Hong Kong court and to take all necessary steps to prevent any disposal of the Company’s assets to Hong Kong. JPL has also been granted authority to participate in the Hong Kong Proceedings on behalf of the Company.
In his judgment dated July 4, 2022, Harris J sent a clear message to “banks and other sophisticated organizations” in Hong Kong that it should be clear to them that foreign office holders, such as JPLs, can exercise the conventional powers of an agent of a company in Hong Kong, such as taking control of its books and records , in particular if these powers are expressly provided for in the order of appointment.
It was noted that banks usually act in accordance with the resolution of the board of directors of a Cayman Islands company without the approval of the Hong Kong court and feel comfortable operating bank accounts for companies. incorporated in offshore jurisdictions. Accordingly, Harris J pointed out that the same banks should not then require foreign liquidators to appear in court for orders confirming that the liquidators have the same powers and may be subject to adverse costs orders if they insist on a court order.
The ruling provides welcome guidance to chargeholders and stakeholders in solvent cross-border scenarios involving overseas-domiciled companies seeking recognition or assistance in Hong Kong. A key question in each case will be whether the insolvency principles are engaged by the claim.
The judgment in Seahawk references and reaffirms long-established principles related to the importance of place of incorporation. As Lord Sumption explained in Singularis: “[E]Even without dissolution, the court could, under ordinary principles of private international law, have recognized as a matter of comity the vesting of the company’s assets in an agent or mandatary appointed or recognized by the law of its incorporation. It is clear from the decision that the manner in which the request is framed and the underlying rationale for the appointment of the incumbent will have a material bearing on the outcome of the application for recognition or assistance from a common law jurisdiction. like-minded foreigner.
The Conyers authors represent the JPLs in the Cayman procedure. Look Chan Ho (Des Voeux Chambers) appeared for JPL in Hong Kong’s application for recognition, commissioned by White & Case Hong Kong.
Conyers has been appointed by the company or the liquidators in the majority of recent cases concerning cross-border recognition and comity between Hong Kong and the Cayman Islands, including for example in GTI Holdings, Silver Base, Seahawk China Dynamic Fund, China Wood and Sun Cheong. As a result, Conyers has unparalleled expertise in navigating and advising on complex cross-border restructuring, insolvency and asset preservation assignments involving Cayman Islands companies.
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