Shenzhen Intermediate People’s Court has recently recognized a Hong Kong court’s verdict on a bankruptcy case and the court’s appointment of bankruptcy administrators.
The Shenzhen court’s decision has paved the way for the Hong Kong liquidators to perform their duties on the mainland with the judicial assistance from the Shenzhen court, Shenzhen Special Zone Daily reported.
The decision is the first one of its kind made under a mechanism for mutual recognition and assistance in bankruptcy proceedings between the courts of the mainland and Hong Kong, the Daily report said.
The bankruptcy case involved Samson Paper Co. Ltd., a company incorporated and registered in Hong Kong in March 1981. Due to the liquidity crisis of its parent company, Samson was mired in operational difficulties and in August 2020, Samson decided to take steps to enter into liquidation rather than being forced to do so as a result of the presentation of a winding-up petition by its creditors. Lai Kar-yan and Ho Kwok-leung of Deloitte Touche Tohmatsu were then appointed as Samson’s liquidators.
Lai and Ho filed an application to the Shenzhen court last year for an order to grant them powers to deal with assets located in Shenzhen. The assets included equity investments, real estate properties and accounts receivable.
In order to take over and dispose of the relevant assets, the liquidators requested Hong Kong High Court to seek judicial assistance from the Shenzhen intermediate court.
Following investigations, the Shenzhen court reached a conclusion that Shenzhen was the locality of Samson’s main properties on the mainland and that the court had jurisdiction over the request for assistance.
“Given the different judicial systems on the mainland and in Hong Kong, there are discrepancies in the bankruptcy laws and judicial practices in the two jurisdictions,” said Cao Qixuan, the Shenzhen court’s presiding bankruptcy judge. “The success of the trial of this ‘first case in the country’ lies in the accurate application of the guiding opinions of the Supreme People’s Court and efforts made in achieving compatibility between the two regions’ rules.”
In May 2021, the Supreme People’s Court issued a circular on piloting the reciprocal recognition and assistance to insolvency proceedings in Hong Kong and Shenzhen was designated as one of the pilot areas.