RE THE JOINT AND SEVERAL PROVISIONAL LIQUIDATORS OF AGRITRADE RESOURCES LTD (IN PROVISIONAL LIQUIDATION IN BERMUDA)

HCMP 925/2020

[2020] HKCFI 1967

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 925 OF 2020

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D E C I S I O N

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1.  On the 26 June 2020 the joint and several provisional liquidators of Agritrade Resources Limited (“JPLs”), which is in soft-touch provisional liquidation in Bermuda, issued an originating summons for an order for recognition of their appointment and certain powers by way of judicial assistance. Agritrade is incorporated in Bermuda and listed on the Main Board of the Hong Kong Stock Exchange. Mr Justice Narinder Hargun, the Chief Justice of the Supreme Court of Bermuda, appointed the JPLs on 4 June 2020.

2.  The Companies Court has developed during the last few years an informal procedure and draft forms of order for recognition and assistance [1] that in straight forward cases it is prepared to issue on a written application by foreign liquidators and provisional liquidators.  The application I received did not comply with the established procedure and the form of order sought was materially different to the standard forms for which no explanation was given.  Having read the papers my clerk wrote on my instructions to the solicitors for the JPLs informing them that I was prepared to grant an order in the basic standard form.

3.  The solicitors wrote to my clerk on 30 July 2020 requesting an order in the form sought in the originating summons.  What is sought in the originating summons is materially different from the standard forms.  The principal justification advanced for departing from the standard form is that it might cause confusion if the Bermuda order and the Hong Kong order differ materially.  I disagree for reasons, which I will explain in [6].

4.  The proliferation of applications for recognition and assistance in recent years in Hong Kong is largely to be explained by a combination of factors: the corporate structure of many Chinese business groups, the lack of any relevant corporate restructuring legislation in Hong Kong and the impact of the Court of Appeal’s decision in Re Legend International Resorts Ltd [2]. Chinese business groups principal business activities normally take place in the Mainland, but the group holding company is based in Hong Kong, commonly listed here and incorporated in an offshore jurisdiction.  Recognition and assistance has come to be used in one of two situations.  The first is to avoid arguments over jurisdiction that can arise if a winding-up petition is presented in Hong Kong [3].  The second involves the use of soft-touch provisional liquidation in the jurisdiction of incorporation, which has come to be used as technique to overcome the limitations in Hong Kong’s own system [4].  As will be apparent from this summary the applications are not driven by events occurring in the offshore jurisdictions.  They are driven by events occurring in Hong Kong and the Mainland and techniques developed in Hong Kong.

5.  Particularly in the case of the second category I have aimed to establish a process, which provides for quick, cost effective and, so far as possible, uncontroversial recognition and assistance.  I have made clear in a number of decisions and also talks to the profession that it is important that the procedures and standard orders that have been developed are used.  I have suggested that so far as possible, for example, the letters of request are drafted to be consistent with the Hong Kong procedure and order.  I do not know whether in the present case the Chief Justice had been informed of the Hong Kong standard order and a letter of request sought which is consistent with it.  I hope that in future this is what will occur and this decision is shown to judges in offshore jurisdictions in order that they understand the Hong Kong court’s approach.

6.  I am not persuaded that any material difficulty will be created if the order for recognition and assistance is in the form developed in Hong Kong, which contains powers to facilitate restructuring rather than the version that the JPLs have sought.  I have appended to this decision the form of order that I am prepared to grant.  I recognise that there will be cases in which the form of order needs to be amended.  The forms will in any event continue to develop as practitioners and the court encounter different situations and identify improvements.  However, in my view, it is clearly preferable if consistency is maintained and changes are the result of careful consideration not the consequence of a failure to appreciate the reason why the court is trying to achieve a uniform practice.

Appendix

Order

1. The provisional liquidation of Agritrade Resources Limited (in provisional liquidation in Bermuda) (“Company”) and the appointment of Ng Kian Kiat of RSM Corporate Advisory Pte Ltd in Singapore, Oon Su Sun of RSM Corporate Advisory Pte Ltd in Singapore and E Alexander Whittaker of R&H Services Limited in Bermuda, as Joint Provisional Liquidators of the Company for restructuring purposes (“JPLs”), pursuant to the Order of the Supreme Court of Bermuda dated 4 June 2020, be recognised by this Court;

2. The JPLs have and may exercise in the Hong Kong Special Administrative Region the following powers:

(a) to develop and propose a restructuring of the Company’s indebtedness in a manner designed to allow the Company to continue as a going concern, with a view to making a compromise or arrangement with the Company’s creditors, including (without limitation) a compromise or arrangement by way of a scheme of arrangement;

(b) to monitor, oversee and supervise the board of directors of the Company (“Board”) in its management of the Company with a view to developing and proposing any compromise or arrangement with the Company’s creditors, and any corporate and/or capital reorganisation of the Company and its subsidiaries (including but not limited to any share subscription and placement of shares in the Company and its subsidiaries);

(c) without prejudice to the generality of the foregoing, for the purpose of any proposal to be presented to The Stock Exchange of Hong Kong Limited (“SEHK”) for the resumption of trading of the Company’s shares and maintenance of the Company’s listing on the Main Board of SEHK, and to satisfy any resumption conditions:

(i) to investigate matters and report to the regulatory authorities where appropriate;

(ii) to liaise with the Company’s auditors in relation to the provision of audited financial statements; and

(iii) to undertake a review of internal control systems and/or review the internal control report and monitor the progress of the special investigation committee of the Company;

(d) to seek out investors and financiers for the purpose of investing in and/or providing finance to the Company;

(e) to terminate, complete or perfect any agreement or transaction relating to the business of the Company, including, without prejudice to the generality of this power, to novate or assign any such agreements or transactions, so far as may be necessary for the purpose of managing the affairs of the Company, protecting the assets of the Company and restructuring the Company’s assets and affairs to enable the resumption of trading of the Company’s shares and maintenance of the Company’s listing on the Main Board of SEHK;

(f) to oversee the existing Board (and attend any Board meetings) so as to effect a maximisation of returns to the stakeholders of the Company;

(g) to deal with all questions in any way relating to or affecting the assets or the restructuring of the Company;

(h) to do all such things as may be necessary or expedient for the protection or recovery of the Company’s property and assets at law or in equity within the jurisdiction of this Court as the JPLs may consider to be appropriate;

(i) with the consent of the Company, to supervise the operation and/or opening and/or closing of any bank accounts in the name of and on behalf of the Company;

(j) to operate and open any bank accounts on behalf of the Company for the purpose of paying costs and expenses of the provisional liquidation of the Company;

(k) to draw, accept, make and indorse any bill of exchange or promissory note or borrow funds for the purpose of the day to day expenses of the provisional liquidation, in the name and on behalf of the Company, with the same effect with respect of the Company’s liability as if the bill or note had been drawn, accepted, made or indorsed or the loan had been entered into by or on behalf of the Company in the course of its business;

(l) to communicate with and carry out any necessary filings with regulatory bodies as appropriate, including, without limitation, the SEHK and the Securities and Futures Commission in the name and on behalf of the Company;

(m) to make payments to creditors which may have the effect of preferring such creditors, in order to minimise the interruption to the day to day activities of the Company;

(n) to discharge debts incurred by the Company after the commencement of the provisional liquidation of the Company as expenses or disbursements properly incurred in the provisional liquidation;

(o) to engage staff to assist them in the performance of their duties for the purpose of the provisional liquidation and to remunerate them out of the assets of the Company as an expense of the provisional liquidation;

(p) to appoint agents, attorneys and professional advisors as the JPLs may consider necessary to advise and assist them in the performance of their duties and to remunerate them for their reasonable fees and expenses out of the assets of the Company as any expense of the provisional liquidation;

(q) to authorise the Board to exercise such of the above powers relating to the Company on such terms as the JPLs consider fit; and

(r) to do all other things incidental to the exercise of the powers set out herein;

3. Anything that is authorised or required to be done by the JPLs is to be done by all or anyone or more of the persons appointed;

4. For so long as the Company remains in provisional liquidation in Bermuda, no action or proceeding shall be proceeded with or commenced against the Company or its assets or affairs, or its property within the jurisdiction of this Court, except with leave of this Court and subject to such terms as this Court may impose. Any such application for leave shall in the first instance be made in writing to the Companies Judge, or another Judge if the Companies Judge is unavailable;

5. The JPLs do have liberty to apply; and

6. The costs of this application be paid out of the assets of the Company as an expense of the provisional liquidation.