In the landmark decision in case (2021)粤03认港破1号(2021) Yue 03 Ren Gang Po No. 1 (Shenzhen Court Decision), the Shenzhen Intermediate People’s Court (Shenzhen Court) ordered formal recognition in Mainland China of liquidators appointed by the Hong Kong Court of First Instance (Hong Kong Court) over Samson Paper Company Limited (Company) to permit the liquidators to exercise powers over the Company’s assets located in Mainland China. This was the first time a Mainland court formally recognized and granted assistance to Hong Kong liquidators appointed over a Hong Kong company, pursuant to a cooperation mechanism for mutual recognition of insolvency processes between the two jurisdictions that was introduced in May 2021 (Cooperation Mechanism).1

The case is of particular importance in light of the significant level of cross-border economic activity and given that the corporate structure of the Company’s group is widely adopted by Hong Kong listed companies with Mainland operations. The case examines, for the first time, how creditors may rely on the Cooperation Mechanism to reach the assets of debtors located in Mainland China.


The Company was incorporated in Hong Kong, and its parent company (ListCo) was incorporated in Bermuda and listed on the Stock Exchange of Hong Kong Limited. On July 24, 2020, the Bermuda courts appointed provisional liquidators (Liquidators) over ListCo. On August 25, 2020, the Liquidators’ appointment over the Company was confirmed by the Hong Kong Court following a voluntary winding up of the Company in Hong Kong on the grounds of insolvency.

On July 20, 2021, the Hong Kong Court in Re Samson Paper Company Limited [2021] HKCFI 2151 granted an application by the Liquidators for a letter of request be issued for judicial assistance to, inter alia, permit the Liquidators to deal with the Company’s substantial assets in Mainland China (Letter of Request). This ruling was, in its own right, a historic decision, being the first time the courts in Hong Kong issued a Letter of Request to a court in Mainland China under the Cooperation Mechanism.

On August 30, 2021, the Liquidators applied to the Shenzhen Court for an order (1) recognizing the appointment of the Liquidators in Mainland China and (2) seeking (among others) directions that the Liquidators may exercise such powers as liquidators in Mainland China.

Shenzhen Court Decision

The Shenzhen Court Decision sets out, inter alia, its findings on (i) whether this was a case that fell within the scope of the Cooperation Mechanism (including the SPC Opinion), (ii) whether the Shenzhen Court had jurisdiction to decide the case, and (iii) the powers of the Liquidators in relation to the Company’s assets located in Mainland China.

Applicability of the SPC Opinion — COMI factors

The SPC Opinion applies only to Hong Kong insolvency proceedings where the debtor’s center of main interests (COMI) is in Hong Kong. In the Supreme People’s Court’s view, COMI within the meaning of the Cooperation Mechanism generally means that the place of the debtor’s incorporation should be Hong Kong, but courts may take into account other factors such as the debtor’s principal place of business or place of its principal assets.2 The Shenzhen Court referred to the Letter of Request and, consistent with the Hong Kong Decision, noted that the Company’s COMI is in Hong Kong because the Company (i) was incorporated in Hong Kong in 1981, (ii) had been engaging in paper business in Hong Kong for over 40 years, and (iii) had substantial assets in Hong Kong.

Jurisdictional gateway

For the Shenzhen Court to exercise jurisdiction over the case, it must be satisfied that the debtor’s principal assets are situated in, or the debtor has a place of business or representative office in, one of the three pilot areas identified in the Cooperation Mechanism, namely, Shanghai, Shenzhen, or Xiamen.3 The Shenzhen Court found that the Company’s wholly owned subsidiary, Samson Paper (Shenzhen) Co., Ltd. (森信纸业(深圳)有限公司) (Samson Shenzhen), was the Company’s principal asset in Mainland China. Further, Samson Shenzhen was established and had its place of business in Shenzhen. Therefore, Shenzhen Court decided that it has jurisdiction over this application.

Scope of assistance rendered to the Liquidators

The Shenzhen Court Decision noted that the Company had the following assets located in Mainland China:

  1. Wholly owned subsidiaries including one in Shenzhen, namely Samson Shenzhen
  2. Intergroup receivables of HK$422 million due from affiliated companies in Mainland China
  3. Real property located in Beijing

The Shenzhen Court recognized the Liquidators and confirmed that they may exercise such powers as liquidators in Mainland China to carry out the following duties: (i) take over the Company’s assets, seals, books, documents, and other materials; (ii) decide the Company’s internal management affairs; (iii) decide the company’s daily expenses and other necessary expenses; and (iv) manage and dispose of the Company’s assets (Liquidators’ Powers).

However, as envisaged in the SPC Opinion,4 the Shenzhen Court qualified the broad powers granted to the Liquidators, stating that separate court approval would be required if the exercise of Liquidators’ Powers involved, inter alia, the transfer of property out of Mainland China.5


While there are many important legal and practical issues arising from the Shenzhen Court Decision, three stand out as being of particular importance.

First, companies with COMI in Hong Kong are not limited to Hong Kong-incorporated entities. A non-Hong Kong incorporated company’s onshore assets may also be liable to fall within the control of a Hong Kong liquidator through the Cooperation Mechanism. This is especially true where management and operations are controlled through Hong Kong. This result is particularly significant because the vast majority of Hong Kong listed companies incorporated in the Cayman Islands (or other offshore jurisdictions) may still be found to have a COMI in Hong Kong.6

Second, after the jurisdiction gateway has been established, the Liquidators are not limited to assets in the pilot area. While this was not expressly addressed in the Shenzhen Court Decision, it is a necessary consequence of the breadth of the Liquidators’ Powers.7 Specifically, the Liquidators’ Powers included the ability to “manage and dispose of the Company’s assets,”8 and such assets included the property in Beijing and receivables from entities established outside the pilot areas.9 According to relevant judicial interpretations of the Supreme People’s Court, a court in the pilot areas can, on application by a party, apply to court of another province, autonomous region, and/or municipality for assistance (e.g., asset freezing) to enforce the decision of the court in the pilot area.10 This is therefore a very powerful tool for Hong Kong liquidators given that once the jurisdictional gateway is satisfied, mutual assistance can be sought from all courts throughout Mainland China, wherever the debtor’s assets are located.

Third, powers of liquidators once granted are subject to judicial oversight and discretion. As seen in this case, any proposed sale of onshore assets for offshore creditors shall in certain circumstances be subject to approval of the Mainland courts, so offshore creditors should not assume they can realize the onshore assets and remit the proceeds offshore, especially where there are competing onshore creditors of the debtor or the debtor corporate group.


This ground-breaking case provides practical guidance and clarifies legal principles showing how the Cooperation Mechanism operates in practice. The case suggests that once a Hong Kong liquidator is recognized by the courts of Mainland China, the liquidator could have powers to reach assets of the debtor in Mainland China situated beyond the pilot areas. However, it appears that there may nevertheless be limitations on the powers of liquidators in attempting to realize assets in Mainland China for the benefit of offshore creditors. We hope future judicial pronouncements will shed further light as to the limits of such powers.

Postscript: In a recent decision relating to the liquidation of Ozner Water International Holding Ltd. (Ozner Water), the Hong Kong Court ordered a letter of request to be sent to the Shenzhen Court pursuant to the Cooperation Mechanism. As in the Company’s case, the liquidators of Ozner Water sought assistance from the Shenzhen Court to realize assets located in Shenzhen. Crucially, however, unlike in the case of the Company, the liquidators of Ozner Water were appointed over a Cayman Islands, not a Hong Kong, company. It will be important to see how the Shenzhen Court will respond to the request, in particular whether Ozner Water has its COMI in Hong Kong.