First cross-border insolvency case recognising Mainland China administrators in Hong Kong

This article considers the landmark case by the Hong Kong Court of First Instance, in Joint and Several Liquidators of CEFC Shanghai International Group Ltd [2020] HKCFI 167. It is a significant step that the Hong Kong Courts have taken, enhancing cross-border insolvency cooperation between Mainland China and Hong Kong.

Facts

The investment holding company CEFC Shanghai International Group Ltd (“CEFC“), incorporated in Mainland China, went into insolvent liquidation pursuant to an order from Shanghai Intermediate People’s Court and administrators (similar to liquidators in Hong Kong) were appointed. CEFC has a substantial amount of assets in Hong Kong, which includes a claim against its Hong Kong subsidiary, Shanghai Huaxin Group (Hong Kong) Limited (“SHG“), amounting to HK$7.2 billion (“SHG Receivable“).

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Appointing administrators: does recent guidance provide any relief for practitioners?

Following on from our blog: Does e-filing give you a headache? Does the recent guidance issued by the Chancellor help ease the pain?

In this blog we consider that guidance, two recent cases on e-filing a notice of appointment of administrators (“NOA”) out of hours and further judicial consideration on how the 10 day period following filing a notice of intention to appointment administrators (“NOI”) should be calculated, as well as setting out what options practitioners now have if the court rejects an e-filed NOA.

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Hong Kong’s economic outlook remains positive despite challenges

Hong Kong’s well-established financial market, low taxation incentives, and laissez-faire policies have consistently earned the city the title of the World’s Freest Economy and the third easiest place to do business in. Yet, the city’s on-going social movements seem to be having an influence on its financials. Hong Kong reported a GDP contraction of 2.9% year-on-year in the third quarter of 2019 and insurance claims related to the social movements have also reached US $76.5 million.Nonetheless, Hong Kong’s economic competitiveness remains impregnable and was ranked 3rd in the Global Competitiveness Report in 2019. Consequently, there is an optimistic attitude towards the financial and economic future of Hong Kong.

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Unlocking value in an insolvent estate: an update on cryptocurrencies

We previously considered the potential implications for insolvency professionals of the rise of cryptocurrencies (available here). One of the principal issues identified was the uncertainty surrounding the legal status of cryptocurrencies; what class of asset were they and, subsequently, how would they be treated under English law? This question had been subject to little legal or regulatory comment at the time, however the UK Jurisdiction Taskforce (“Taskforce”) has recently issued a statement that brings some welcome clarity.

To summarise the extensive “Legal Statement on cryptoassets and smart contracts” (the “Statement”), the findings most relevant to the scope of this blog are:

  1. Cryptoassets are to be treated in principle as property;
  2. Cryptoassets can be the subject of security; and
  3. Cryptoassets fall within the definition of property for the purposes of section 436(1) of the Insolvency Act 1986 (the “Act”).

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What changes does the restructuring and insolvency market expect to see in 2020?

202 DecorationIn this blog, we highlight changes to law, practice and procedure that will or could impact the restructuring insolvency market this year – covering important changes that should be on your radar – as well as providing an update on those changes that were expected but which might be delayed beyond 2020.

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Which law applies when determining the validity of an assignment of receivables cross-border?

The validity of an assignment of receivables cross-border depends on the law that applies to the assignment.

What might amount to a valid assignment in one jurisdiction, does not mean, that it is valid in another and where there are competing claims to the receivables and competing jurisdictions, the question of which law applies and therefore whether there has been a valid assignment significantly affects the ability of the assignee to rely on the assignment.

This question arose in the context of a German bankruptcy where the issue was referred to the European Court of Justice (“ECJ “) for a preliminary ruling. The recent decision of the ECJ of 9 October 2019 surprised many because it went against the commonly held view that in determining jurisdictional questions Article 14 of the European Union Rome I Regulation applied.

In this blog we consider the implications of the ECJ judgment in Case C-548/18 BGL BNP Paribas SA vs. TeamBank AG Nürnberg and how this affects assignees and the priority of competing claims. We also consider the proposed EU Assignment Regulation and how that might assist in determining the question of jurisdiction in the future.

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What is the “key” to validly appointing administrators?

First, there was the HMV case, then Skeggs Beef and SJ Henderson. Following which we had further judicial decision in All Star Leisure and now Keyworker Homes, all of which considered the validity of appointment of administrators using the e-filing system.

Keyworker Homes deals with these questions:

  1. Can a notice of intention to appoint administrators be e-filed out of court hours?
  2. How is the ten day time period in paragraph 28 (2) of Schedule B1 of the Insolvency Act 1986 (the “Act”) calculated following filing a notice of intention appointment?
  3. Can directors e-file a notice of appointment out of court hours?

We look at the answers to those, and consider some of the issues that  the answers create.

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Directors may be entitled to a refund of payments made in settlement of the HMRC loan charge

Following an independent review of HMRC’s loan charge the UK Government has announced that there will be a number of changes to the loan charge, which in some cases will include repayment.

Not only will some directors be able to claim back payments made in settlement, others will be able to take advantage of more flexible ways to pay.

In brief, the notable changes are:

  • the loan charge will not apply to outstanding loans made before 9 December 2010
  • the loan charge will not apply to outstanding loans made in any tax years between 9 December 2010 and before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take action (for example, opening an enquiry); and
  • people can now elect to spread the amount of their outstanding loan balance evenly across 3 tax years

In cases where the loan charge does not apply, HMRC will refund voluntary payments made under settlement agreement reached since March 2016.

In this blog, we consider the practical implications of these changes for directors and also what impact they will have on claims against directors in the context of insolvency.

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New Year, New Resolutions and New Name

Happy New year to all of our blog readers!

With the start of a new decade, we are giving our restructuring and insolvency blog a fresh new look and name: Restructuring GlobalView.

Restructuring GlobalView will provide readers with unique perspectives on restructuring and insolvency issues from around the globe, offering practical views from the global practice on topics of relevance and importance to the restructuring market.

If you are a current subscriber, you do not need to re-register to continue to receive updates but we encourage your colleagues and contacts to sign up.

For a chance to catch up on what you may have missed in 2019 see our New Year’s resolutions.

Does e-filing administration appointment documents give you a headache?

Causer v All Star Leisure (Group) Ltd [2019] EWHC 3231 (Ch) (Causer) is yet another case which highlights the issues that e-filing can cause for practitioners when using the system to appoint administrators.

The decision in Causer followed Skeggs Beef in concluding that whilst the appointment of an administrator by a QFCH out of hours using the e-filing system is defective it is a defect capable of remedy. The case is nevertheless worthy of note because:

(a) it is a further reminder that when a QFCH wishes to appoint administrators they must follow the out of hours procedure set out in the Insolvency Rules 2016. Failure to do so will inevitably incur the costs of an application to remedy the defect; and

(b) it highlights a number of issues that e-filing creates, which we discuss further below. (In fact, in this case it appears that IT problems contributed to the defective appointment).

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