First Application made to HKSAR Court in connection with request for recognition of and assistance to HKSAR insolvency proceedings by Mainland Court

Less than two months after the HKSAR's Secretary for Justice, Ms. Teresa Cheng, SC,  and Vice-President of the Supreme People's Court ("SPC"), Mr. Yang Wanming,  signed a document on 14 May 2021 concerning mutual recognition of and assistance to insolvency proceedings between the courts of the Mainland and the HKSAR ("Cooperation Mechanism"), an application in accordance with the Cooperation Mechanism was made in the High Court of the Hong Kong Special Administrative Region ("HKSAR") in HCMP 963/2021 by Lai Kar Yan (Derek)  and Ho Kwok Leung Glen, both of Deloitte, as joint and several liquidators of Samson Paper Company Limited (in voluntary liquidation), an insolvent company.

The Liquidators needed to obtain such recognition and assistance in the Mainland in order to take possession of and deal with the Company's substantial assets in the Mainland which are principally located in Shenzhen and mainly comprise a wholly- owned subsidiary in Shenzhen, another subsidiary and branches, intra-group receivables with a book value of over HK$420 million and an apartment in Beijing.

This is the first application made in accordance with the Cooperation Mechanism in either Hong Kong or the Mainland. A liquidator from the HKSAR, or appointed by a  court outside the PRC, has never been formally recognised by a Mainland Court.

The Liquidators therefore made an application to the HKSAR Court to request it to issue a letter of request to the Shenzhen Court.

On 20 July 2021, the Honourable Mr. Justice Harris handed down his Decision. He stated that he was satisfied that it was desirable that the Liquidators' appointment be recognised and assistance be provided in Shenzhen by the Shenzhen Intermediate People's Court.

In order for an application for recognition to be granted by the Mainland Court, it is necessary under the Cooperation Mechanism, inter alia, for the HKSAR Court to provide two documents, a letter of request and a judgment determining that a letter of request should be issued.

The Honourable Mr. Justice Harris stated in his Decision that in his opinion the case was a proper case for a letter of request to be issued by the HKSAR Court to the Shenzhen Court requesting that the Shenzhen Intermediate People's Court make an order recognising the Liquidators and providing assistance to them. Accordingly, the Honourable Mr. Justice Harris made an order that a letter of request, in simplified Chinese, in the form appended to the Order be issued to the Shenzhen Intermediate People's Court seeking its assistance in aid of the Company's liquidation and its liquidators.

Formal recognition of the Liquidators by the Shenzhen Intermediate People's Court would be the first occasion on which a court in the Mainland formally recognised and assisted a liquidator in response to a letter of request issued by the HKSAR Court. We therefore eagerly await the response of the Shenzhen Intermediate People's Court.

Hope there will be more cases to make use of the Cooperation Mechanism in the near future.