It is common for businesses in Hong Kong to adopt a corporate structure that utilises companies incorporated in foreign jurisdictions such as the British Virgin Islands, Bermuda or the Cayman Islands. In practice, these offshore companies often have no businesses or assets in their place of incorporation but instead adopt Hong Kong as their "centre of main interest" (COMI).(1)

There is no precise definition of "COMI". To date, the courts in Hong Kong have not used COMI as the yardstick for granting common law recognition or assistance, mainly because Hong Kong has no legislation dealing with cross-border insolvency and restructuring.(2) Nevertheless, it has been suggested in recent Hong Kong judgments that the criteria for recognition should in future primarily be determined by where a company's COMI is.(3) Examples of key factors that have been adopted in Hong Kong to determine a company's COMI are the location of the company's offices, operations or board meeting venues.(4)

In cross-border insolvencies, it is often a recurring theme for tension to take place between a COMI and a foreign place of incorporation in the contest for primary jurisdiction. A company's presence or absence in its offshore place of incorporation has been said to be "highly relevant and will usually be the most important factor" for the Hong Kong Companies Court in determining whether to wind up a foreign company.(5) Nevertheless, it is still a case-by-case matter for the court to ascertain the degree of connection between the company and Hong Kong and assess whether the connection is sufficient.(6)


Recognition route
In Hong Kong, one of the existing long-haul routes to wind up a foreign company is to first obtain a winding-up order from the company's place of incorporation then enforce the winding-up order in Hong Kong by way of applying to the Hong Kong court for an order recognising the appointed liquidator's powers (known as the "recognition route").(7) In this way, assets can be obtained and winding-up can be effected in situations where the company only has assets in Hong Kong and has nothing to do with the foreign place of incorporation.

The recognition route has a number of drawbacks, as illustrated by the facts of Re Up Energy Development Limited.(8) For example:

  • a recognition order would not bind the company or its creditors as they are not parties to the originating summons;
  • the powers sought by foreign appointed liquidators could go far beyond the purpose of considering and implementing a restructuring proposal in respect of the company's debts;
  • when almost all the fundraising activities have been carried out in Hong Kong or are governed by Hong Kong law, it is necessary to carry out investigation in Hong Kong; and
  • if the recognition route is adopted, foreign appointed liquidators are not subject to the supervision of the official receiver or the court, which they would be if they are appointed as provisional liquidators by an order made in Hong Kong.(9)

Direct route
The recognition route has historically overshadowed the alternative short-haul route under section 327 of Hong Kong's Companies (Winding Up and Miscellaneous Provisions) Ordinance (CWUO), whereby the Hong Kong Companies Court has the power to directly make a winding-up order against a non-Hong Kong company provided that the three common law core requirements(10) are satisfied (known as the "direct route"). Such power has always been available to the Hong Kong courts and there have been numerous instances of the Hong Kong Companies Court exercising this power.

The recent decision of Re Up Energy Development Limited consolidates the previous line of cases that have preferred the direct route(11) and reflects a shift in the courts' attitude towards various fact-sensitive factors that are common in a winding-up process.


In Re Up Energy Development Limited, Up Energy Development Limited (the company) was incorporated in Bermuda on 30 October 1992. It was registered as a non-Hong Kong company under Part 16 of the Companies Ordinance and later listed on Hong Kong Exchanges and Clearing (HKEx) on 2 December 1992. An unpaid creditor of the company to which a substantial sum was owed asked the court to make a winding-up order against it, which was opposed by the Bermuda-appointed provisional liquidators.

With its major assets in mainland China, the company carried on most of its financing activities in Hong Kong, and had not carried out any business activities in Bermuda other than the maintenance of its registered office.

Up Energy Development Limited began to run into financial difficulties in or around 2016. Upon a winding-up petition presented by one of the company's creditors in Bermuda, it was expected that the company would be wound up by the Bermuda court on 11 March 2022. The Bermuda court made a further order to appoint provisional liquidators to supervise the process of corporate restructuring. In Hong Kong, Harris J granted a recognition order on 16 August 2017, recognising the appointment of the provisional liquidators. Since then, the company, under the supervision of the provisional liquidators, sought to resume trading in HKEx. Despite its efforts, the company's resumption proposal was considered not viable in all events and the decision to cancel the listing of the company's shares on the HKEx was upheld.

Notwithstanding the failure in obtaining the HKEx's approval to resume trading, another unpaid creditor, HEC Securities Limited (the petitioner), did not seek a winding up order against the company, but instead opted to file numerous consent summonses with the provisional liquidators without the consent of other creditors who had given notice of intention to appear, requesting the court to adjourn the petition. As a result, the petition was adjourned many times.

At the hearing on 14 February 2022, the company opposed the petition on the grounds that:

  • the company was expected to be wound up by the Bermuda court on 11 March 2022, therein for the creditor's benefit;
  • the creditors were "relatively apathetic" as to where the company was to be wound up;
  • the second core requirement was not satisfied;
  • the BVI law expert had opined that Hong Kong-appointed liquidators would not be able to register themselves as members or directors of the company's subsidiaries incorporated in the British Virgin Islands;
  • the mainland law expert opined that the mainland court would be unlikely to grant recognition and assistance;
  • the company's affairs could be sufficiently dealt with by way of the recognition route; and
  • even if the powers of Hong Kong-appointed liquidators could be more extensive, this ought not be the reason to "bypass" the second core requirement.

The Honourable Madam Justice Linda Chan decided that the mere fact that the company was expected to be wound up by the Bermuda court could not be a ground to decline granting a winding up order against the company. Chan J held that the petitioner had satisfied the second core requirement by demonstrating a reasonable possibility of benefit to the creditors upon a winding up order. Adding to that, in the absence of a winding up order made against the company, the court did not have the power under common law to confer any powers on the Bermuda liquidators or make any provisions under the CWUO available to the company. Finally, a winding up order against the company would be in the interests of the creditors as it avoided the need for the Bermuda liquidators to make successive applications to the court for recognition and powers under the CWUO, even assuming the court had power to entertain such applications. As such, the petitioner was entitled to a winding up order against the company.


It is traditionally thought that in cross-border insolvencies, the company's place of incorporation is usually the principal jurisdiction governing the winding-up process. As a matter of comity and common law traditions, courts in ancillary jurisdictions (eg, Hong Kong in this case) shall defer to the primary court by exercising their discretionary powers to only assist the foreign liquidators for the purpose of facilitating the process of the winding-up, such as the granting of recognition orders. But this is not always the case, as seen from past cases where Hong Kong courts adopt the "direct route, which effectively makes Hong Kong – the COMI of the company but not its place of incorporation – the principal jurisdiction. Thus, the difficulty lies in ascertaining the principal jurisdiction in cross-border insolvencies. To strike an appropriate balance between "assertiveness and restraint, given the multiplicity of interests and frequent politicization of major cross-border insolvencies" has been described as a "judicial cri de coeur".(12)

The decision discussed in this article highlights some of the shortcomings of the recognition route and appears to suggest that the recognition route does not always serve Hong Kong well, at least under the facts of this case.

In particular, Chan J clarified that there had been a misplaced assumption that it is possible for the Hong Kong courts to make various CWUO provisions applicable to a company without granting a winding-up order against the non-Hong Kong company. In reality, the only way to invoke the operation of Hong Kong's statutory scheme of winding up is through making a winding-up order. Without a winding-up order, there is no basis for the court to confer any of the powers or provisions under the CWUO to the Bermuda liquidators or the company.

Past cases that have adopted the recognition route(13) were distinguished from the present case. In those cases, it was said that either the company at issue had already been wound up in the place of incorporation, or the courts were merely concerned with specific cross-border issues (such as assisting foreign liquidators to order a private examination against some local persons). Chan J placed emphasis on the fact that the provisional liquidators admittedly had not carried out any meaningful investigation into the company for the five years that they had been appointed. This proved to be the final nail in the provisional liquidators' coffin, as the preferred attitude is that the provisional liquidators are supposed to protect the interests of the unsecured creditors and to act in their best interests.

The judgment in Re Up Energy Development Limited signifies the Hong Kong Companies Court's change in attitude for winding up companies incorporated in foreign jurisdictions. Prior to this judgment by Chan J, precedents reflect that it has become customary for an offshore company to be wound up in its place of incorporation and for offshore liquidators to seek common law assistance in Hong Kong by way of recognition orders. The Hong Kong Companies Court has demonstrated greater restraint in granting winding-up orders or appointing provisional liquidators in respect of foreign incorporated companies in the past. This judgment hence reflects the Hong Kong Companies Court's more pragmatic approach in winding-up foreign incorporated companies, by giving significant consideration to the practical reality of the particular companies' business, financing and administrative functions.

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(1) As Harris J pointed out in Re Lamtex Holdings Ltd [2021] HKCFI 622, he has:

dealt with 20 applications for recognition and assistance from companies incorporated in offshore jurisdictions since May 2020 when the High Court reopened after the end of the General Adjournment period necessitated by Covid-19. These have nearly all been Mainland business groups listed on the SEHK.

(2) Provisional Liquidator of Global Brands Group Holding Ltd v Computershare Hong Kong Trustees Ltd [2022] HKCFI 1789.

(3) Ibid.

(4) Ibid.

(5) Kam Leung Sui Kwan v Kam Kwan Lai [2015] 18 HKCFAR 501.

(6) Ibid.

(7) Examples of the Hong Kong Companies Court adopting the recognition route include:

  • Re FDG Electric Vehicles Ltd [2020] 5 HKLRD 701;
  • Re CEFC Shanghai International Group Ltd [2020] 1 HKLRD 676;
  • Re Agritrade Resources Ltd [2020] 4 HKLRD 616; and
  • Re China Bozza Development Holdings Ltd [2021] 2 HKLRD 977.

(8) [2022] HKCFI 1329.

(9) These factors were raised by Chan J in paragraph 19 of Re Up Energy Development Limited to refute the arguments advanced by counsel representing the Bermuda-appointed joint provisional liquidators.

(10) The three core requirements are laid down in Re Real Estate Development Co [1991] BCLC 210 and have been adopted by the Hong Kong courts:

  • The company has a sufficient connection with Hong Kong.
  • There is a reasonable possibility that the winding-up order would benefit those applying for it.
  • The court can exercise jurisdiction over one or more persons interested in the distribution of the company's assets.

(11) For example:

  • Kam Leung Sui Kwan v Kam Kwan Lai [2015] 18 HKCFAR 501;
  • Re G Ltd [2016] 1 HKLRD 167;
  • Re China Huiyuan Juice Group Limited [2020] HKCFI 2940; and
  • Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Limited [2020] HKEC 2290.

(12) Company Law in Hong Kong: Insolvency, Sweet & Maxwell, Chapter 12.

(13) See:

  • Cambridge Gas Transport Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508;
  • Re HIH Casualty and General Insurance Ltd [2008] 1 WLR 852; Stichting Shell Pensioenfonds v Krys [2015] AC 616;
  • Singularis Holdings Ltd v PricewaterhouseCoopers [2015] AC 1675; and
  • Re Moody Technology Holdings Ltd [2020] 2 HKLRD 187.