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COMI As First Port Of Call? Harris J Lays Out A Modified Common Law Framework For Recognising Foreign Insolvency Proceedings In Hong Kong – Insolvency/Bankruptcy

Historically, the Hong Kong courts have generally recognised
foreign insolvency proceedings commenced in the jurisdiction in
which the company is incorporated. This may no longer be the case
in Hong Kong following the recent decision of Provisional Liquidator of Global Brands Group
Holding Ltd v Computershare Hong Kong Trustees Ltd
HKCFI 1789
(Global Brands).

In the Global Brands decision Justice Harris has
suggested that in future a Hong Kong court will now recognise
foreign insolvency proceedings in the jurisdiction of the
company’s “centre of main interests” (COMI). Indeed,
it is suggested that it will not be sufficient, nor will it be
necessary, that the foreign insolvency process is conducted in a
company’s place of incorporation.

Much of the discussion in the case appears to have been
obiter dictum, as Global Brands Group Holdings Limited
(the Company) was incorporated and being wound up
in Bermuda, and therefore recognition of the Bermudan proceedings
aligned with the traditional common law basis for recognition based
on the jurisdiction of incorporation.

However, the decision nevertheless indicates judicial support
for a significant shift in Hong Kong’s common law recognition
regime. The approach to common law recognition suggested by Harris
J is substantially similar to that taken by the Singapore Court in
Re Opti-Medix Ltd (in liquidation) [2016] SGHC 108 (which
we discussed here). It also aligns with the global trend of
embracing a COMI-based approach to recognition, including in the
UNCITRAL Model Law on Cross-Border Insolvency which has
now been incorporated into domestic legislation of many countries
around the world.


The Company was an investment holding company incorporated in
Bermuda which, along with its subsidiaries (the
Group), were engaged in the business of branded
apparel, footwear, accessories and related lifestyle products in
North America and Europe. The Company was also listed on the Hong
Kong Stock Exchange (HKEX). Such use of a holding
company incorporated in an offshore jurisdiction by a business
group whose operating and asset-owning companies are either in Hong
Kong or Mainland China is a factual pattern familiar to insolvency
practitioners in Hong Kong and Mainland China.

The Group faced immense financial difficulties following the
Covid-19 pandemic. Whilst exploring restructuring options, on 10
September 2021, the Company presented an application to the
Bermudan court for the appointment of a “soft-touch”
provisional liquidator in Bermuda (the Provisional
) with limited powers to help restructure the
Company (during which time the management of the Company would
remain in control). The appointment was made on 16 September

Attempts to restructure proved unsuccessful and the Company
ultimately obtained a winding up order from the Bermudan Court, on
5 November 2021. The Provisional Liquidator continued in office as
liquidator on the making of the winding-up order. Since his
appointment in September 2021, the provisional liquidator had been
trying to take possession of the Company’s assets in Hong Kong.
These included cash balances representing a surplus from sale of
shares in the Group’s employee share schemes and monies held in
the Company’s local bank accounts.

The Provisional Liquidator sought an order from the Hong Kong
Court for recognition and assistance in order to take control of
the relevant assets of the Company.

Order and decision

Justice Harris of the Hong Kong Court of First Instance (the
Court) made the order recognising the Provisional
Liquidator and the Bermuda provisional liquidation and liquidation
processes. He made further orders allowing the Provisional
Liquidator to (among other things) take possession of the assets
and records of the Company (including in particular certain bank
balances) and to dispose of those assets.

This recognition and assistance was granted on the basis that
the Court may recognise a foreign insolvency regardless of whether
or not the company may be wound up in Hong Kong. The liquidator was
the lawful agent of the Company as a matter of the law of its place
of incorporation (and entitled to direct that its assets are
transferred from accounts in Hong Kong to accounts in Bermuda).

The order confirming that the Provisional Liquidator had power
to secured and obtain the Company’s assets and documents in
Hong Kong was “simply confirming the position under orthodox
principles of private international law and gives the Provisional
Liquidator assistance, which might fairly described as more
managerial in nature than of a type associated specifically with

Commentary on recognition approach going forwards

Notwithstanding the relatively limited scope of the actual
decision in Global Brands, Harris J used the decision as
an opportunity to set out his views as to the appropriate approach
to be adopted by the Court when determining applications for
recognition and assistance going forwards.

Mr Justice Harris indicated that the correct approach for
assessing whether or not a foreign liquidation should be recognized
in Hong Kong is first to determine if, at the time of the
application for recognition, the foreign liquidation is taking
place in the jurisdiction of the company’s COMI.

If the foreign liquidation is not taking place in the
jurisdiction of the company’s COMI, then recognition and
assistance ought to be declined unless the application falls in one
of the following two categories:

  • If the liquidator is appointed in the place of incorporation,
    the application is limited to recognising a liquidator’s
    authority to represent a company and seeking orders that are an
    incident of that authority, which Mr Justice Harris described as
    managerial assistance“. On the facts of this
    case, the Court granted an order of recognition of the provisional
    liquidator of the Company in order for the Provisional Liquidator
    to receive and transfer out the relevant assets located in Hong

  • If the liquidator is appointed in the place of incorporation
    and the circumstances do not fall within the first exception above,
    then recognition and only limited and carefully prescribed
    assistance may be given as a matter of practicality.

Ascertaining COMI

Mr Justice Harris has also considered a list of non-exhaustive
factors that a Hong Kong court will look at to determine a
company’s COMI. Drawing on the United States decision of Judge
Martin Glenn in In re Ocean Rig UDW Inc (2017) 570 BR 687
(Bankr SDNY), he indicated these factors included the location
where a company:

  • conducts its management and operations;

  • has offices;

  • holds its board meetings;

  • has its officers residing;

  • has its bank accounts;

  • maintains its books and records; and

  • has conducted or is conducting its restructuring

Harris J also considered the relevant date for determining COMI.
In this regard he indicated a preference for the date on which the
foreign office-holder’s Hong Kong recognition application is
made, noting that this would be consistent with the position under
Article 6 of The Supreme People’s Court’s Opinion on
Taking Forward a Pilot Measure in relation to the Recognition of
and Assistance to Insolvency Proceedings in the Hong Kong Special
Administrative Region
. It would also be consistent with the
approach taken by the Singapore courts in Re Zetta Jet
[2019] SGHC 53.

Moving towards a COMI approach

The approach in the Global Brands case is an extension of the
principles stated in Re Lamtex Holdings Ltd [2021] HKCFI
622 and Re Ping An Securities Group (Holdings) Ltd [2021]
HKCFI 651, about which we wrote here. The position under Hong Kong common law
has now moved firmly towards a COMI-centred approach. It also
adopts a similar approach to recognition at common law as taken by
the courts in Singapore, as decided in Re Opti-Medix Ltd (in
[2016] SGHC 108 which we wrote about here.

The Hong Kong Court has long worked with practitioners to use
common law techniques to help facilitate debt restructurings of
offshore-incorporated companies in Hong Kong, so far as the common
law permits. However, Mr Justice Harris recognised that there have
been two major problem areas:

  • the restrictions that exist on winding up a foreign
    incorporated company. These restrictions were demonstrated in the
    long-running saga of Shandong Chenming (although the Court of Final
    Appeal was able to take a practical approach in interpreting the
    second core requirement, as we previously blogged); and

  • the lack of any legislation in Hong Kong facilitating the debt
    restructuring and rehabilitation of financially distressed

An end to recognition of offshore ‘soft-touch’
provisional liquidators?

In respect of the second difficulty, a practice was developed of
companies incorporated in offshore jurisdictions being put into a
form of soft-touch provisional liquidation in their jurisdictions
of incorporation followed by the provisional liquidators seeking
recognition in Hong Kong and seeking assistance from the Hong Kong
Court in the form of the limited powers necessary for them to
participate in the restructuring process in Hong Kong.

As noted by the Court in this case and in Re Lamtex, in
recent years many HKEx-listed companies regularly employed this
tactic to obtain a moratorium on creditor actions in Hong Kong. In
most of these cases the company had no material economic connection
to those offshore jurisdictions other than being incorporated
there. As Mr Justice Harris stated in the judgment, treating the
place of incorporation in such circumstances as being the natural
home or commercially most relevant jurisdiction for the purpose of
determining which jurisdiction is the appropriate place for the
seat of a principal liquidation is highly artificial.

Harris J indicated his concern that this approach had led to
abuse, stating at [12]:

Unfortunately, it has become increasingly
apparent that what is commonly referred to as the Z-Obee
technique has been abused by certain insolvency practitioners and
offshore law firms. It seems to me tolerably clear that many of the
offshore soft-touch provisional liquidators adopt a debtor in
possession model, which has been rejected in Hong Kong, the
principal purpose of which, viewed from the Company’s point of
view, is to obtain so far as possible a moratorium on action being
taken to recover unpaid debts. The application to appoint provision
liquidators in the present case would appear to be an

Accordingly, he indicated a reluctance to grant such recognition
in future:

Although it is not an issue that I need to
decide in the present case and is one which requires detailed
consideration, my preliminary view is that in future the Hong Kong
court should generally decline to recognise soft-touch provisional
liquidators appointed by offshore jurisdictions on the kind of
terms I have summarised.

Cooperation with Mainland Courts

Mr Justice Harris also considered that the Hong Kong – Mainland
Cross-Border Insolvency Cooperation Mechanism (see here), which permits Mainland Courts to
recognise Hong Kong-appointed liquidators over companies whose COMI
is in Hong Kong, was relevant to a consideration of the development
of common law assistance in Hong Kong. In the absence of relevant
legislation, embracing a COMI-based approach would bring Hong Kong
in line with the approach in the Mainland and indeed the approach
adopted by other jurisdictions such as Singapore.


In short, this decision signals a new approach for common law
recognition of foreign insolvency proceedings in Hong Kong based on
COMI. Whilst most of the commentary in the decision was, strictly,
obiter dictum, given the important role that Harris J
plays in determining Hong Kong insolvency cases we expect that this
approach will be built upon in future decisions.

The common law of Hong Kong in this area remains very much alive
and keeps developing. It will be interesting to see what impact
this decision has on Hong Kong restructuring practice, which in
recent years has featured significant involvement of offshore
insolvency and restructuring processes. This and other decisions
indicate that we may expect restructuring and insolvency matters to
be addressed under Hong Kong law to a greater extent in the future.
In the meantime, it seems the Hong Kong Court will continue to give
short shrift to the once-popular technique of appointing
“soft-touch” liquidators in offshore jurisdictions
especially where such appointment is considered by the Court to be
artificial or devoid of real connections to the company’s
activities in its COMI.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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