It may now be easier for Australian insolvency practitioners to carry out investigations and recover assets located in Hong Kong and in mainland China. On 8 February 2018, and for the first time, the High Court of Hong Kong granted an application for recognition and assistance in that jurisdiction for voluntary liquidators of an entity incorporated in the British Virgin Islands.
In the matter of Re The Joint Liquidators of Supreme Tycoon Limited (in liquidation)  HKCFI 277, the Hong Kong High Court found that foreign liquidators are eligible for common law recognition of their appointment and assistance in relation to investigations being carried out in Hong Kong regardless of whether the liquidators’ appointment to an insolvent company was voluntary in nature or a compulsory liquidation ordered by a Court.
The Hong Kong High Court declined to follow an earlier decision of the Privy Council in Singularis Holdings Limited v PricewaterhouseCoopers  UKPC 36 which suggested that the common law power to recognise and assist foreign insolvency proceedings would not extend to voluntary liquidations.
Relevantly, the Hong Kong High Court found that (at ):
“In the case of liquidators appointed in jurisdictions with similar insolvency regimes to Hong Kong, the assistance may extend to granting orders that give the foreign liquidators substantially similar powers to, for example, investigate the affairs of the company by examination and orders for production of documents as a Hong Kong liquidator would have. Indeed, as recognised by the Privy Council, the common law power of assistance exists for the purpose of surmounting the practical problems posed for a worldwide winding-up of the company’s affairs by the territorial limits of the powers of each country’s court.”
The Court confirmed that the rationale underlying the common law power of assistance is “modified universalism” and that the proceedings must be collective in nature in the sense that it is a “process of collective enforcement of debts for the benefit of the general body of creditors.” Furthermore, the common law power of assistance is only available if it is necessary for the insolvency practitioner to discharge his or her functions.
However, it should be noted that the Hong Kong court made a distinction between a solvent voluntary liquidation (known as a members voluntary liquidation (MVL)) and an insolvent voluntary liquidation (known as a creditors voluntary liquidation (CVL)), with the effect that a MVL is not a “collective proceeding” and “is more akin to a private arrangement, which would not qualify for foreign recognition and assistance.
What does this mean for Australian insolvency practitioners?
While this decision relates to an entity incorporated in the British Virgin Islands, we expect that this decision will make it possible for insolvency practitioners appointed in any other common law jurisdictions, whether the appointment was voluntary (in the context of a CVL) or as a result of a Court order, to apply for recognition and assistance in the Hong Kong High Court to the extent that it is necessary to discharge their obligations.
We expect that this decision will make it easier for foreign practitioners to pursue assets located in Hong Kong and to obtain a judgment that is enforceable in that jurisdiction. Furthermore, a judgment obtained in Hong Kong could be registered and enforced in mainland China due to the existence, since 2008, of a bilateral agreement between those two jurisdictions which allows for mutual recognition, registration and enforcement of judgments. This is important because, as at the date of this article, it is almost impossible to enforce an Australian judgment directly in mainland China due to lack of reciprocity.