|
HCMP 367/2020
[2020] HKCFI 825
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO 367 OF 2020
________________________
| |
IN THE MATTER of China Oil Gangran Energy Group Holdings Limited (In Provisional Liquidation in the Cayman Islands) |
| |
and |
| |
IN THE MATTER of the inherent jurisdiction of the Court |
________________________
BY
| |
THE JOINT AND SEVERAL PROVISIONAL LIQUIDATORS OF CHINA OIL GANGRAN ENERGY GROUP HOLDINGS LIMITED (IN PROVISIONAL LIQUIDATION IN THE CAYMAN ISLANDS) |
Applicants |
________________________
| Before: |
Hon Harris J in Chambers |
| Date of written submission by the Applicants: |
17 April 2020 |
| Date of Decision: |
5 May 2020 |
| Date of Reasons for Decision: |
21 May 2020 |
________________________
REASONS FOR DECISION
________________________
1. China Oil Gangran Energy Group Holdings Limited is incorporated in the Cayman Islands. It is listed on the Growth Enterprise Market of the Hong Kong Stock Exchange. On 22 October 2019 a petition was presented by the Company in the Financial Services Division of the Grand Court of the Cayman Islands (“Cayman court”). On the same day the Company issued a summons in the Cayman court for the appointment of provisional liquidators to conduct a soft-touch provisional liquidation with a view to pursuing a debt restructuring. On 5 November 2019 Yen Ching Wai David and So Kit Yee Anita of Ernst & Young Transactions Limited, Hong Kong, and Keiran William Hutchison of Ernst & Young Ltd, in the Cayman Islands, were appointed as soft-touch provisional liquidators by the Cayman court. The Cayman provisional liquidators have obtained a letter of request dated 28 November 2019 from Mr Justice Parker of the Cayman court seeking recognition of their appointment in Hong Kong and providing assistance to them to facilitate the provisional liquidators progressing a restructuring, which will involve the provisional liquidators liaising with the Hong Kong Stock Exchange.
2. One creditor of the Company, A. Plus Financial Press Limited (“Petitioner”) has presented a winding-up petition in Hong Kong against the Company. The court has adjourned the hearing of the Petition to 24 August 2020 in order to facilitate the Company’s on-going restructuring efforts. The Petitioner is aware of the provisional liquidators’ intention to make this application and has no objection to it.
3. The court has previously made similar orders. The general principles which apply to applications for recognition have most recently been considered by me in Re CEFC Shanghai International Group Ltd [1]. Providing assistance in the form of an order recognising foreign provisional liquidators’ right to pursue a restructuring is discussed and approved in Re Z-Obee Holdings Ltd [2] and Re Joint Provisional Liquidators of Hsin Chong Group Holdings Ltd [3]. There is a recent and extensive discussion of the justification for providing such assistance given the limitations that exist to similar powers being granted to provisional liquidators appointed by the Hong Kong court (as a consequence of the Court of Appeal’s 2006 decision in Re Legend International Resorts Ltd [4]),in the decision of DHCJ William Wong SC in Re Joint Provisional Liquidators of Moody Technology Holdings Ltd [5]. It is not necessary to repeat what is explained in these two decisions. However, Mr Ho has helpfully brought to my attention recent decisions from other jurisdictions, which are consistent with the Hong Kong court’s approach.
4. The first is Re Olinda Star Ltd [6] in which the US Bankruptcy Court recognised a British Virgin Islands (“BVI”) soft-touch provisional liquidation as a foreign main proceeding under Chapter 15 of the US Bankruptcy Code (“Code”). Olinda is incorporated in the BVI. The BVI has a similar insolvency regime to that of Hong Kong. It has an equivalent provision to s193 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“Ordinance”). However, the BVI courts interpret their equivalent provision as permitting the appointment of provisional liquidators for the purposes of restructuring a company’s debt and avoiding a liquidation. Section 1501 of the Code explains the purpose of Chapter 15, namely, to incorporate the Model Law on Cross-Border Insolvency so as to provide effective mechanisms for dealing with cases of cross-border insolvency. As I understand it, recognition of foreign proceedings or office holders pursuant to Chapter 15 necessarily means that US Bankruptcy Court treats the foreign proceedings as constituting insolvency proceedings. For present purposes, the relevant passages of Judge Glenn’s judgment are as follows [7]:
“Olinda has engaged in a ‘soft-touch’ provisional liquidation, with a view to implementing the successful reorganization of Olinda… In a ‘soft-touch’ BVI provisional liquidation the directors typically retain day-to-day control of the company, but the provisional liquidators are kept apprised of the actions taken by directors in the ordinary course of business… However, corporate authority to pursue a course of action that is outside the ordinary course of business (such as proposing entry into a scheme of arrangement to creditors) rests with the provisional liquidators...
The core powers conferred on the JPLs by the BVI Court are to oversee the exercise of power of the sole director outside the ordinary course of business, and ultimately implement the restructuring… More specifically, the JPLs have the authority to do all acts and execute, in the name of and on behalf of Olinda, all deeds, receipts and other documents, and for those purposes, use the company seal of Olinda when necessary…
[T]he Court finds that the Foreign Representative satisfies each of the requirements of section 1517(a) and grants recognition to the BVI Proceeding as a foreign main proceeding.”
5. The Olinda decision thus stands for the proposition that, assessed by reference to relevant US legal principles, soft-touch provisional liquidation is an insolvency proceeding.
6. The second authority is Representation of Lydian International Limited [8] in which the Royal Court of Jersey recognised at common law Canadian debtor-in-possession proceedings coupled with the appointment of a monitor in respect of a Jersey-incorporated company, even though Jersey law does not have the same insolvency procedure. Such Canadian proceeding is analogous to the Cayman soft-touch provisional liquidation in the present case. For present purposes, the relevant passages of the Jersey judgment are as follows:
“The [Companies’ Creditors Arrangement Act (‘CCAA’)] is a Canadian federal statute allowing insolvent debtors to restructure their business and financial affairs. In particular, it allows a company to continue its business whilst it seeks to make arrangements with its creditors. This includes ‘debtor in possession’ insolvency proceedings whereby the debtor … remains in possession of their property and are able to carry on their business until conclusion of the proceedings. The proceedings are carried out under the supervision of the court with the assistance of an independent insolvency practitioner known as the ‘Monitor’…
The Ontario Court requests the assistance of the Royal Court to act in aid of the applicants and the Monitor in the conduct of the reorganisation of the applicants and in particular, in summary, by recognising the appointment of the Monitor; by recognising the rights and powers of the applicants and the Monitor in respect of the property of Lydian International; by declaring that no action shall be taken or proceeded with against Lydian International except by leave of the Ontario Court and by granting such further or other relief as the Royal Court shall think fit in aid of the applicants and the Monitor in the reorganisation of Lydian International…
It is true that the relief available under the CCAA including, for example, the appointment of the Monitor and certain other orders made by the Canadian Court, are not features...
| 
