RE 上海昇奕科城实业有限公司 (in Liquidation in the Mainland of the People’s Republic of China)

HCMP 298/2025

[2025] HKCFI 1744

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 298 OF 2025

___________________

___________________

_____________________________

REASONS FOR JUDGMENT

_____________________________

1.  By originating summons dated 25 February 2025 (“OS”) issued by Shanghai K-Insight Law Firm (上海市金石律師事務所), the administrator of 上海昇奕科城實業有限公司[1] (“Company”) appointed by the Shanghai No. 3 Intermediate People’s Court (“Shanghai Court”) on 30 September 2024 (“Administrator”), seeks recognition and assistance from the court for the purpose of performing their functions qua administrator of the Company in Hong Kong. At the hearing, this Court made an order set out in §29 below. These are the reasons for my judgment.

2.  The application is supported by the Affirmation of Ma Xiaomin[2] dated 26 February 2025 (“Ma 1^st”)[3] and the Letter of Request issued by the Shanghai Court dated 7 February 2025 (“Letter of Request”).

3.  At the hearing, Ms Abigail Liu, counsel for Mr Cheng Zhaohan (“Cheng”)[4], asked for leave to file an unsigned and undated affirmation of Cheng in opposition to the OS. Curiously, in the summons filed by Messrs. Henry Wai & Co. (“HW”), Cheng does not seek leave to intervene in or join as a party to these proceedings. When asked by this Court as to whether Cheng would apply for leave to be joined as a party, Ms Liu (after taking instructions) confirmed that Cheng would not apply for leave to be joined as a party and consequently, would not seek leave to file Cheng’s affirmation or oppose the application. This was despite the fact that 2 sets of submissions dated 17 and 23 April 2025 had been lodged by Ms Liu on behalf of Cheng, both in opposition to the OS.

Factual background

4.  On 31 October 2002, the Company was established in Shanghai and primarily carries on its business in the Mainland[5].

5.  The Company has direct and indirect interests in 3 companies incorporated in Hong Kong[6]:

(1)  100% shareholding in Tiancheng Biopharmaceutical Holdings Limited (“Tiancheng Biopharm HK”)[7], which holds a bank account (“SPD Account”) with Shanghai Pudong Development Bank Co., Ltd, Hong Kong Branch (“SPD”)[8];

(2)  21.84% shareholding in Tiancheng Fortune Management Limited (“Tiancheng Fortune HK”)[9]; and

(3)  Through Tiancheng Biopharm HK and Tiancheng Fortune HK, an indirect 29.54% interest in Tiancheng International Investment Limited (“Tiancheng International Investment HK”)[10]

(collectively “Assets”).

6.  By judgment dated 30 September 2024 (“Judgment”) in (2024) 滬 03破854號 (“Liquidation Proceedings”), the Shanghai Court allowed the application made by 華鑫國際信托有限公司 (“Creditor”) to put the Company into liquidation on the following grounds:

(1)  As at 28 February 2021, the Company owed the Creditor RMB1,947,412,568.11 which it failed to repay;

(2)  During the enforcement proceedings, the Shanghai Court did not find any asset which may be subject to enforcement and therefore terminated the enforcement proceedings, as stated in the judgment in (2024) 滬 0116執2379號執行裁定書; and

(3)  The Company was unable to pay its debts. Although the Company asserted that it was not insolvent, it had not been able to adduce any evidence in support of its assertion.

7.  Also on 30 September 2024, the Shanghai Court made an order in the Liquidation Proceedings appointing the Administrator to office (“Appointment Order”). In the Appointment Order, the duties of the Administrator and the names of 11 individuals within the Administrator’s team were identified.

8.  On 7 February 2025, the Shanghai Court issued the Letter of Request which referred to the Appointment Order and requested the Hong Kong court to recognise and assist the Administrator in performing their duties in investigating the affairs of the Company including its assets, collecting and taking control of the books, records and assets of the Company located in Hong Kong.

9.  In the Letter of Request, the Shanghai Court confirmed that:

(1)  the Administrator had been conferred with the powers and was subject to the duties as prescribed by the Enterprise Bankruptcy Law (“EBL”) of the People’s Republic of China, which include:

(a)  taking possession of the Company’s assets, chop, books and records, etc.;

(b)  investigating the Company’s financial condition;

(c)  determining the Company’s internal management matters;

(d)  determining the Company’s ordinary expenses and other necessary expenses;

(e)  prior to convening the first creditors’ meeting, determining if the Company’s business should continue or be ceased;

(f)  managing and distributing the Company’s assets;

(g)  representing the Company in litigation, arbitration or other legal proceedings;

(h)  convening creditors’ meetings; and

(i)  any other duties as the Shanghai court considers necessary to be performed by the Administrator.

(2)  According to the Administrator’s preliminary investigation, the Company has the Assets located in Hong Kong[11].

Challenges faced by the Administrator

10.  On 31 December 2024, the Administrator became aware that SPD received a request to transfer USD60 million out of the SPD Account, but the instructions did not originate from the Administrator[12]. To stop the withdrawal, on the same day, the Administrator took the following steps to gain control over Tiancheng Biopharm HK and the SPD Account:

(1)  The Company passed a shareholder’s resolution to appoint Virtus Nominees Limited and Mr. Leung Ho Sun Wilson as additional directors (“Additional Directors”)[13].

(2)  The Additional Directors then signed written board resolution to effect changes to the bank signatories of SPD Account, the company secretary and the registered address of Tiancheng Biopharm HK[14].

13.  The relevant parties were then notified[15] with updated forms filed with the Companies Registry (“CR”)[16].

14.  On 2 January 2025, the Additional Directors resolved to convene an extraordinary general meeting (“EGM”) to remove Cheng as director[17].

15.  Cheng disputed the validity of the appointment of the Additional Directors through the following means:

(1)  By letter dated 9 January 2025 Messrs. Simon C.W. Yung & Co (“SY”) on behalf of Cheng disputed the validity of the appointment of the Additional Directors. This was followed by a series of correspondence[18] exchanged between SY, the Administrator and the Additional Directors’ solicitors, Messrs. Patrick Chu, Conti Wong Lawyers LLP (“PCL”)[19].

(2)  On 20 January 2025, Cheng caused the 2024 Annual Return Form (NAR1) be filed at the CR.

(3)  On 22 January 2025, Cheng caused a “Rectification of Typographical or Clerical Error in Registered Document” be filed at the CR[20].

16.  On 7 February 2025, the EGM was held at which resolution was passed to remove Cheng as director of Tiancheng Biopharm HK [21].

17.  Nevertheless, Cheng continued to dispute the resolutions in that:

(1)  On 10 February 2025, PCL was informed by SPD over the telephone that [22] Cheng had repeatedly requested to transfer money out of the SPD Account; SPD could not provide further details on the SPD Account as the changes on directorship were not reflected in the most updated records at the CR.

(2)  On 17 February 2025, Cheng (through SY) reiterated that he would not accept the resolutions passed, unless there was a recognition order from the Hong Kong court[23].

(3)  On 24 February 2025, the CR stated that it had received inconsistent representations and withheld the pending documents from registration[24].

(4)  On 10 March 2025, HW sent an originating summons in HCMP 370/2025 seeking inter alia declarations that the resolutions for appointment of Additional Directors and removal of Cheng were invalid and injunctive relief against the Additional Directors.

(5)  On 12 March 2025, PCL provided HW with the Letter of Request and the OS, and invited Cheng to confirm that he would not oppose the application or attend the hearing and that he would not take steps to impugn the resolutions.

(6)  On 13 March 2025, HW stated that “there are problems in connection with the appointment of the Administrator” and proceedings would be commenced in the Mainland regarding the same; Cheng is “interested” in the recognition proceedings and to assist the court in determining the same and “reserves the right to adduce such evidence and/or make such representation” in the recognition proceedings as he may see fit.

(7)  On 2 April 2025, PCL wrote to the CR to put on record that the further corporate forms (including a “Notice of Change in Particulars of Company Secretary and Director” (FND2B) and a “Notice of Change of Address of Registered” (FNR1)) had been filed without the authority of the Additional Directors.

(8)  On 7 April 2025, PCL received a letter from SPD’s solicitors stating that in view of the conflicting instructions, a satisfactory confirmation as required under the relevant banking document “shall include at a minimum a Hong Kong court judgment or order affirming the authorisation of the persons giving such instructions”.

18.  Further, the Administrator has not been able to gain access to the relevant information and documents of the 3 companies in which the Company has interests:

(1)  As regards Tiancheng Fortune HK:

(a)  On 20 January 2025, the Company (represented by the Administrator) requested Tiancheng Fortune HK to provide copies of its latest financial statements and directors reports. This was followed by chaser letters sent on 20 January 2025 and 14 February 2025[25].

(b)  On 25 February 2025, Tiancheng Fortune HK through its solicitors replied inter alia that “[i]n the absence of a recognition order granted by the Hong Kong Court, our client finds it difficult to recognise the authority of the Administrator to act for [the Company] in Hong Kong and to entertain your request for the documents sought”.

(2)  As for Tiancheng International Investment HK:

(a)  On 14 February 2025, Tiancheng Biopharm HK (represented by the Additional Directors) issued a letter requesting for provision of the latest financial statements and shareholders’ resolutions, which was again met with no reply[26].

(b)  The Administrator is aware that it had sold 2 projects companies at a substantial consideration but the whereabouts of the funds are unknown[27].

19.  On 14 April 2025, Cheng alongside with 3 other shareholders of the Company belatedly made an application to the Shanghai Court to challenge the Appointment Order on the grounds inter alia that the Administrator has conflict of interest and is not competent, and asked the Shanghai Court to suspend the Appointment Order.

20.  At the hearing on 21 April 2025, the Shanghai Court rejected all the grounds advanced by the 4 shareholders and held that only creditors’ meeting(債權人會議)has the right to make an application to challenge the Appointment Order[28].

Applicable principles

21.  The applicable principles have been summarised in Re Guangdong Overseas Construction Corp (in liq) [2023] 3 HKLRD 262, §17, as applied in Re China Electronics Leasing Company Ltd (in liq) [2024] 5 HKLRD 805). In short, the applicant has to satisfy the court that:

(1)  the foreign insolvency proceedings are collective insolvency proceedings which include proceedings opened in a civil law jurisdiction;

(2)  the foreign insolvency proceedings are conducted in the jurisdiction in which the company’s centre of main interest is located; and

(3)  the assistance is necessary for the administration of a foreign winding up or the performance of the office-holder’s functions, and the order is consistent with the substantive law and public policy of the assisting court so it is not available for purposes which are properly the subject of other schemes.

22.  As to the extent and terms of assistance to be provided to the office-holder, “the authorities show that the court has granted assistance to a foreign office-holder (a) to take control of the assets of the company; (b) to stay the local proceedings against the assets of the company; and (c) to obtain and gather information and documents relating to the company from third parties” (Re Guangdong Overseas, §17(3)).

Application

23.  The request for assistance is made by the Shanghai Court, which is a court in the pilot areas under the Cooperation Mechanism. However, the power of the court to recognize and assist office-holder appointed by a court of another jurisdiction derives from common law, and the approach of the court is to ask whether the criteria for recognition and assistance are satisfied (Re China Electronics, §12).

24.  Each of the criteria for recognition and assistance is satisfied.

25.  First, the Liquidation Proceedings as ordered by the Shanghai Court are collective insolvency proceedings. This is reinforced by the Judgment, the Appointment Order and the Letter of Request, all of which were made in the Liquidation Proceedings.

26.  Second, the Liquidation Proceedings are conducted in the Mainland, which is both its place of establishment and centre of main interest.

27.  Third, the order sought is necessary having regard to the following facts and matters:

(1)  The Company has Assets in Hong Kong which include at least USD60 million in the SPD Account. The Administrator is under a duty to take control of the Assets and apply them in accordance with the EBL[29].

(2)  There has been no delay in bringing the present application (cf China Electronics, §17)[30].

(3)  The Administrator has attempted (cf China Electronics, §19) to take control of and obtain information pertaining to the Assets but the relevant parties refused to comply with the requests without a recognition and assistance order of the Hong Kong court.

28.  Fourth, the order sought is consistent with the substantive law and public policy of the court. As submitted by Mr Michael Lok[31], counsel for the Administrator:

(1)  The terms of the OS have been formulated to suit the Company and includes specific reference to the shares in Tiancheng Biopharm HK and Tiancheng Fortune HK held by the Company (Re Guangdong Overseas, §2).

(2)  The terms of the draft Order follow the wordings of the orders granted by the court in similar applications.

(3)  The basis and the need for each term have been summarised in a table at Annex 2 to the skeleton.

29.  The court makes an order in the following terms:

(1)  The liquidation of上海昇奕科城實業有限公司(formerly known as科瑞天誠投資控股有限公司) (the “Company”) and the appointment of Shanghai K-Insight Law Firm (上海市金石律師事務所) as its administrator (the “Administrator”) be recognised by this Court, the team of Administrator consists of 馬曉旻、黃俊、陳煥芳、楊娟娟、歐陽思凡、韓靜、史一飛、俞慧（實習）、馮守亮（實習）、梁齡允（實習）、顧銘銘，馬曉雯as the responsible person;

(2)  The Administrator has and may exercise in the Hong Kong Special Administrative Region the following powers:

(a)  to ascertain the affairs of the Company and conduct investigations thereon;

(b)  to request and receive from third parties documents and information concerning the Company and its promotion, formation, business dealings, accounts, assets, liabilities or affairs including the cause of its liquidation;

(c)  to locate, protect, secure and take into their possession and control all assets and property within the jurisdiction of this Court to which the Company is or appears to be entitled, including 21.84% shareholding (i.e. 1,000,000 shares) in TIANCHENG FORTUNE MANAGEMENT LIMITED (天誠財富管理有限公司) (a limited company incorporated in the Hong Kong Special Administrative Region, business registration number: 66159437) and 100% shareholding (i.e. 284,726,840 shares) in TIANCHENG BIOPHARMACEUTICAL HOLDINGS LIMITED (天诚生物制药控股有限公司) (a company incorporated in the Hong Kong Special Administrative Region, business registration number: 68683238) (collectively, the “Shares”);

(d)  to locate, protect, secure and take into their possession and control the books, papers, and records of the Company including the accountancy and statutory records within the jurisdiction of this Court and to investigate the assets and affairs of the Company and the circumstances which gave rise to its liquidation. The books, records and documents of the Company include but not limited to:

(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 provided by the auditors to the Company in relation to the audit work;

(e)  to take all necessary steps to prevent any disposal of the Company’s assets (including the Shares) and, in particular, to secure any credit balances in any bank accounts in the name or under the control of the Company within this jurisdiction;

(f)  to operate and open or close any bank accounts in the name and on behalf of the Company for the purpose of collecting the assets and paying the costs and expenses of the Administrator;

(g)  to retain barristers, solicitors or attorneys, accountants and/or such other agents or professional persons as the Administrator considers appropriate for the purpose of advising or assisting in the execution of their powers and duties under this Order;

(h)  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, including any applications for:

(i)  orders for disclosure, the production of documents and/or examination of third parties to facilitate their investigations into the assets and affairs of the Company and the circumstances which gave rise to its liquidation; and/or

(ii)  ancillary relief such as freezing orders, search and seizure orders in any legal proceedings commenced.

(3)  Anything that is authorised or required to be done by the Administrator may be done by all or any one or more of the persons authorised by the Administrator;

(4)  If the Administrator applies for a stay or other directions in respect of proceedings in the High Court of any sort as a consequence of the recognition of their appointment by this Order, such application shall be listed before the judge in charge of the Companies and Bankruptcy List. The Administrator shall write to the clerk to the judge in charge of the Companies and Bankruptcy List seeking case management directions for the determination of any application to deal with any application made by the Administrator pursuant to this order;

(5)  The Administrator 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 liquidation.

Annex