Decision of the Hong Kong court

In considering whether to grant recognition, the Hong Kong court considered the following three issues:

1. Did the Reorganisation constitute a collective insolvency process?

The Hong Kong court would only recognise collective insolvency processes as assessed by Hong Kong legal principles. It was therefore necessary for the Hong Kong court to first examine this issue.

The Hong Kong court found that the Reorgnisation was a process specifically provided for by chapter 8 of the Enterprise Bankruptcy Law of the People’s Republic of China and was intended to restructure debt, rehabilitate a company’s business and avoid liquidation. While there was no directly comparable procedure in Hong Kong, the Hong Kong court held that the Reorganisation clearly concerned all of the creditors of HNA Group and it should be characterised as a collective insolvency procedure.

2. Did the Reorganisation take place in HNA Group’s country of incorporation or where HNA Group had its centre of main interests?

This issue was not controversial, as HNA Group was incorporated in mainland China, where the Reorganisation took place.

3. Did it matter that the Hainan court would not recognise Hong Kong insolvency proceedings and liquidators, meaning that there was a lack of reciprocity between the Hong Kong court and the Hainan court in that respect?

The Hong Kong court referred to the Cooperation Agreement signed by the Secretary for Justice and the Supreme People’s Court on 14 May 2021, which provided a procedure for the recognition and assistance of insolvency proceedings between Hong Kong and three Intermediate People’s Courts in Shenzhen, Shanghai and Xiamen. The Cooperation Agreement did not extend to Hainan.

Despite the above, the Hong Kong court held that reciprocity was not a requirement of common law recognition and assistance in Hong Kong. The possibility that the Hainan court would not recognise Hong Kong insolvency proceedings and liquidators would not bar the Hong Kong court from granting recognition at the request of the Hainan court and was not in itself a consideration in the Hong Kong court’s determination as to whether to grant recognition and assistance.

By reason of the above, the Hong Kong court held that it was an appropriate case where recognition and assistance should be granted.

Terms of the recognition order of the Hong Kong court

The terms of the recognition order as granted by the Hong Kong court were appended to the judgment. Apart from granting recognition of the Reorganisation and the appointment of the Administrator, the Hong Kong court also granted conventional powers to the Administrator to be exercised in Hong Kong, including but not limited to the powers to request and receive documents and information concerning HNA Group; to locate, secure and take possession of assets of HNA Group in Hong Kong; and to operate any bank accounts of HNA Group in Hong Kong. The Administrator could also apply to the Hong Kong court for a stay or other directions in respect of any proceedings before the Hong Kong court.

Conclusion

This decision demonstrates the Hong Kong court’s readiness to recognise and assist insolvency proceedings outside Hong Kong to ensure the effective realisation and fair distribution of the debtor’s assets under a single system of distribution. The Hong Kong court has again referred to the recent Cooperation Agreement between Hong Kong and mainland China in its decision and confirmed that reciprocity is not a requirement of common law recognition and assistance in Hong Kong. The cross-border insolvency law and practice in Hong Kong continues to develop and mature, and it is clearly an area of law that merits close monitoring.