Understanding the Trends A Review of Insolvency Litigation in Hong Kong in 2023

Insolvency litigation witnessed intriguing developments across multiple aspects in Hong Kong in 2023, ranging from the court’s updated Practice Direction on Bankruptcy and Winding-Up Proceedings to on-going debate surrounding the interplay between insolvency proceedings and arbitration clauses.  

In this Legal Update, we examine major developments that unfolded.

The key takeaways are:

1. It is now clear that where there is an exclusive jurisdiction clause in the underlying agreement providing for a foreign jurisdiction, the court will generally hold parties to their bargain and stay or dismiss a creditor’s bankruptcy/winding-up petition if the debt is disputed. But it’s uncertain whether the same approach applies to underlying agreements with arbitration clauses. 
2. The court confirmed that it would take a broad and macroscopic assessment when considering an appeal against a decision to admit or reject a proof of debt.
3. An updated Practice Direction adds new methods of service for a statutory demand in bankruptcy cases and clarifies various aspects of case management for insolvency proceedings. 
4. The court has jurisdiction to grant an Order to compel a former director of a company in liquidation with centre of main interest in Hong Kong to ratify the replacement of himself as sole director of subsidiaries of the company by a new director. 
5. Keepwell deeds are enforceable in Hong Kong, and the timing of breach is crucial. 
6. For the first time, the court recognized cryptocurrency as property available for distribution by liquidators. 
7. Hong Kong courts have consistently shown willingness to issue letters of request for cross- border recognition and assistance.