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:
- 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.
- 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.
- 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.
- 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.
- Keepwell deeds are enforceable in Hong Kong, and the timing of breach is crucial.
- For the first time, the court recognized cryptocurrency as property available for distribution by liquidators.
- Hong Kong courts have consistently shown willingness to issue letters of request for cross- border recognition and assistance.
