The Hong Kong Court have confirmed for the first time that a foreign voluntary liquidation is eligible for common law recognition and assistance in Hong Kong.
China Culture Media International Holdings Limited, incorporated in the BVI, was wound up on 9 May 2016. China Culture was the sole shareholder of Supreme Tycoon Limited, also incorporated in the BVI.
On 6 September 2016 the Joint Liquidator, on behalf of China Culture, passed a written shareholders' resolution to wind up Supreme Tycoon and to appoint himself and his Joint Liquidator as Joint Liquidators of Supreme Tycoon.
The Joint Liquidators sought to obtain information, books and records about Supreme Tycoon's affairs from third parties in Hong Kong, and therefore applied to the court in Hong Kong for recognition and assistance.
The Court held that even though Supreme Tycoon went into voluntary liquidation as a result of a shareholders' resolution, the liquidation was in all respects akin to compulsory winding up.
The Court referred to Singularis Holdings Limited v PricewaterhouseCoopers, in which the Privy Council suggested that the common law power to recognise and assist foreign insolvency proceedings would not extend to voluntary liquidations, which was noted as being essentially a "private arrangement". They noted that the power to order production of information and documents should be limited, and should only be available to assist foreign office holders.
The Court also referred to Re Gulf Pacific Shipping, where the Singapore Court declined to follow the comments in Singularis, stating that no distinction should be drawn between voluntary and compulsory processes; however the Court distinguished their decision from Re Gulf Pacific Shipping as that case related to a members' voluntary liquidation, a solvent process.
The Court noted that whilst there is a difference between the level of Court supervision in voluntary and compulsory liquidations, "the difference is one of degree, not kind".
The Court noted that both compulsory and voluntary liquidations were a process of collective enforcement of debts for the benefit of the general body of creditors. The Court therefore held that where foreign insolvency proceedings are a collective proceeding and the foreign insolvency practitioner needs the Hong Kong Court's assistance to discharge their function, "it would seem arbitrary and unduly restrictive to insist that they are not entitled to assistance merely because they were not appointed by the foreign court". Therefore the fact that Supreme Tycoon was a voluntary liquidation was not a bar to the Hong Kong court recognising and assisting the liquidation.
The Court noted, however, that if this case had concerned a foreign solvent liquidation such as a member's voluntary liquidation, that would be more akin to a "private arrangement" as referred to in Singularis, and would not fall within the principle of modified universalism. The Court would not draw a distinction between a voluntary and compulsory liquidation, only a solvent and insolvent liquidation.
Therefore the Court granted the Recognition Order. This is understood to be the first time that the Hong Kong Court has granted recognition in a creditors' voluntary winding up. Foreign liquidators in voluntary insolvent liquidations may now obtain recognition and assistance to carry out their functions in Hong Kong.