A “one stop” recognition order requiring non-responsive third parties to comply


Given Hong Kong’s status as an international financial hub and the fact that more than 75% of the companies listed on the main board of the Hong Kong Stock Exchange are incorporated in either the Cayman Islands or in Bermuda (only around 11 percent are incorporated in Hong Kong), it is common for foreign liquidators to conduct investigations in Hong Kong.

As a general recap (following recent developments in the jurisprudence) [1], in order to seek recognition and assistance from the Hong Kong Court, a foreign liquidator would have to establish the following:

(1) The foreign insolvency proceedings are collective insolvency proceedings;

(2) The foreign insolvency proceedings are opened in the company’s centre of main interest (COMI). If not, the Court can still render assistance if the foreign liquidators are appointed in the company’s place of incorporation or if COMI is unclear, provided point 3 below is satisfied;

(3) The order sought is necessary for the administration of the foreign winding up and for the performance of the foreign officeholder’s functions; and

(4) The order sought is consistent with the substantive law and public policy of the assisting court and vice versa in respect of the domestic court.

Further, in terms of procedure, if the application could potentially affect third parties, it should not be made ex-parte (see Re Up Energy).  As we can see from Re Global Brands, third parties who do not object to the order being made can be named as nominal defendants so that they are bound by the order made.

As regards collection of documents belonging to the company, following a series of decisions of the Companies Court in Joint Official Liquidators of A Company v B&C, Re Bay Capital Asia Fund LP and Re Seahawk China Dynamic Fund, it is now well established that institutions such as banks are expected to provide the information and documents sought by the foreign liquidators without a Hong Kong recognition order. They should be assisting such foreign liquidators in the performance of their duties, not providing hurdles or making it difficult. The consequences of doing so are that they will be made a respondent in the recognition application and bear potential costs consequences.

What happens when a third party ignores the foreign liquidator’s request to produce documents and information voluntarily?

What can a foreign liquidator do to ensure that the third party render the necessary assistance?

In the recent decision in Angela Barkhouse, the Official Liquidator of Bridge Global Absolute Return Fund SPC (in official liquidation) v. Leading Securities Company Limited (formerly as CRIC Securities Limited) & Others[2], Tanner De Witt successfully obtained the first of its kind “one stop” recognition order which recognised the foreign liquidator’s appointment in Hong Kong and at the same time, imposed discovery obligation on those non-responsive third parties.   

This case concerns the official liquidator (Angela Barkhouse of Kroll) of one of the vehicles used by the 1MDB fraudsters seeking documents and information from third parties in Hong Kong. In the course of conducting investigations in Hong Kong, the official liquidator was able obtain relevant documents and information from some third parties voluntarily but not others. Following the decisions from Re Up Energy and Re Global Brands, the official liquidator then proceeded to commence proceedings by naming those non-responsive parties as defendants and including in the originating summons provisions requiring the defendants to produce documents and information. This innovative approach could no doubt be useful in the future to expedite foreign liquidators’ investigations in Hong Kong.

Further, the Court importantly confirmed in Re Bridge Global that the principles laid down by the Court of Final Appeal in Re Kong Wah Holdings Ltd regarding the threshold in obtaining an order for production of books and papers “relating to the company or the promotion, formation, trade, dealings, affairs or property of the company”[3] apply with equal force where a foreign liquidator relies on the common law in seeking a similar order from the Hong Kong Court. In this regard, Her Ladyship helpfully summarised the effect of the Re Kong Wah principles:

(1) Under s.286B or the common law, the court is concerned with whether it is appropriate to exercise its power to assist a liquidator to carry out his functions, which are to collect the assets of the company, settle its liabilities and distribute its surplus funds amongst its creditors; and to investigate the causes of the company’s failure and the conduct of those concerned in its dealings and affairs. 

(2) For the court to exercise the wide power to assist a foreign liquidator by ordering a third party to produce documents or information, the liquidator has to satisfy the court that the information or documents sought are reasonably required to enable him to carry out his functions, and the court must endeavour to strike a balance between the liquidator’s reasonable requirements and the need to avoid making an order that is unreasonable, unnecessary or oppressive to the party from whom the document or information are sought. 

This case is of paramount importance as it established that non-responding third parties could be made subject to a “one stop” recognition order also imposing disclosure obligation on respondents. It further confirms that, after obtaining a “standard” recognition order in Hong Kong, a foreign liquidator can rely on the common law to obtain further production and/or examination orders in Hong Kong. This eliminates any potential hurdles created by cases like Re Up Energy where the Court (rightly) held that foreign liquidators could not rely on the Hong Kong legislation (such as s.286B or other “claw back” provisions) after recognition. That being said, although the Court has once again taken a pro-active approach to assist foreign liquidators, practitioners should still be alive to the fact that the Court will no longer grant carte blanche recognition orders and will only grant recognition and assistance on a “needs only” basis[4].

Tanner De Witt acted for Angela Barkhouse of Kroll. We were assisted by Jonathan Ng of Temple Chambers and also by Adam Crane and Nicosia Lawson of Baker and Partners in the Cayman Islands.

If you would like to discuss any of the matters raised in this article, please contact:

Ian De Witt
Partner | E-mail

Tim Au
Partner | E-mail

Samantha Chan

Associate | E-mail

The above is not intended to be relied on as legal advice and specific legal advice should be sought at all times in relation to the above.

[1] See the recent decision Re Guangdong Overseas Construction Corporation [2023] HKCFI 1340

[2] [2024] HKCFI 1160

[3] Section 286B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32)

[4] See paragraph 22 and 23