RE SILVER BASE GROUP HOLDINGS LTD

HCCW 385/2021 & HCMP 859/2022
(HEARD TOGETHER)

[2022] HKCFI 2386

HCCW 385/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 385 OF 2021

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 859 OF 2022

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(HEARD TOGETHER)

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REASONS FOR DECISION

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1.  On 21 October 2021 Wang Jianfei issued a petition to wind up the Company on the grounds of insolvency. His Petition was amended on 16 December 2021. The Company is incorporated in the Cayman Islands and its shares were listed on the Main Board of the Stock Exchange of Hong Kong (“HKSE”). The Company applied successfully to be put into soft-touch provisional liquidation in the Cayman Islands on 11 November 2021. This was intended to facilitate a restructuring of its debt. The restructuring was unsuccessful. On 5 May 2022 the Company was put into liquidation in the Cayman Islands and liquidators appointed (“Cayman Liquidators”). The Hong Kong Petition is now unopposed. Initially the Cayman Liquidators applied for recognition in Hong Kong (“Recognition Application”). They no longer do so and take the view that the Company should be wound up here; although ideally the Hong Kong liquidators will be the same individuals as the Cayman Liquidators for reasons of economy and efficiency. I will make no order in respect of the Recognition Application with no order as to costs.

2.  As the matter has developed there are very limited issues for the Court to consider. As I have already explained, the Petition is no longer contested. As the Company is incorporated in the Cayman Islands it is necessary for it to satisfy the three core requirements[1] which guide the Court in determining whether or not it should exercise its statutory discretion pursuant to section 327 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, which permits the court to order the winding up in Hong Kong of a foreign incorporated company. The three criteria in my view are clearly satisfied in the present case. First, the Company was listed in Hong Kong and this is enough to constitute sufficient connection. Secondly, there is a reasonable prospect of a winding up in order in Hong Kong benefiting the Petitioner. There are clearly assets here including cash in bank. The fact that the Cayman Liquidators consider it necessary that there is a liquidation in Hong Kong supports this conclusion. Thirdly, there are creditors in Hong Kong other than the Petitioner over whom the Court can exercise jurisdiction. I will, therefore, make the normal winding up, order one set of costs for the supporting creditors and also order that the Cayman Liquidators’ costs be paid out of the assets of the Company.

3.  There is one other matter that I will comment on, although it is not necessary for me to decide it. The Cayman Liquidators’ decision not to pursue their Recognition Application is partly a consequence of my recent decision in Re Global Brands Holding Ltd[2]. I held that in future foreign liquidators should be recognised and assisted if they were appointed in a company’s centre of main interests (“COMI”) rather than the place of incorporation, unless they happened to be the same. The Cayman Liquidators recognise that the Company’s COMI is not in the Cayman Islands. Initially they took the view that they could, however, properly seek limited recognition, what I call in Global Brands managerial recognition, of their authority as the duly appointed agents of the Company appointed in accordance with the law of its place of incorporation, which established principles of private international law recognise determines matters of internal management and authority to represent a foreign company. In Global Brands the company was not in liquidation in Hong Kong. It seems to me that if a foreign company is in liquidation in Hong Kong then the principle I have just explained may be qualified. A number of matters will need further consideration in the future:

(1) What, if any, recognition should be granted to a foreign liquidator appointed in the place of incorporation (if it is not the COMI) if the company is wound up in Hong Kong? In such circumstances should the Hong Kong court proceed on the basis that within its jurisdiction only the Hong Kong appointed liquidator is the duly authorised agent of the company?

(2) It is commonly assumed that if a company is in liquidation in its place of incorporation and wound up in another jurisdiction, the latter is to be treated as an ancillary liquidation[3]. Should this be the case if the place of incorporation is not the COMI and the reality is, as is commonly the case with letter box jurisdictions, that a company’s connection with it is formal and it has no assets, creditors or debtors located there? There is no practical reason for requiring realisations to be transferred to the liquidators appointed in the place of incorporation if all the creditors, or the large majority, are located in Hong Kong and the Mainland. On the contrary it just increases costs and delay. It also needs to be borne in mind that proceeding on the basis that the liquidation in the place of incorporation (which is not COMI) is the main liquidation involves recognising it; which is inconsistent with (1).