First Provisional Liquidation case achieved resumption under New De-listing Regime
Derek Lai and Glen Ho were appointed as Joint and Several Provisional Liquidators of Freeman FinTech Corporation Limited ("Freeman FinTech")(Now known as Arta TechFin Corporation Limited (Stock Code: 279)), a Hong Kong-listed company primarily engaged in providing financial services.
Prior to its misfortunes, Freeman FinTech offered wide-ranging services in segments such as the trading and brokerage of securities and futures, insurance brokerage and corporate finance advisory. Freeman FinTech, along with selected group companies, were licensed to carrying out businesses in Types 1, 2, 4, 6 and 9 regulated activities under the Securities and Futures Ordinance, as well as insurance brokerage services under the Insurance Ordinance.
On 28 February 2020, given severe cash flow issues, Messrs. Derek Lai and Glen Ho of Deloitte China were appointed as Joint and Several Provisional Liquidators (“JPLs”) by the High Court of Hong Kong. Freeman FinTech suspended trading of its shares on the Hong Kong Stock Exchange (the “SEHK”).
To facilitate a reorganisation of Freeman FinTech’s existing business streams, as well as to improve its difficult financial position, the JPLs considered its vast offerings of financial services with the intention to rationalize the inefficiencies and cash-burning limbs within Freeman FinTech. The restructuring services team at Deloitte and the JPLs also had to handle numerous challenges from creditors and stakeholders alike, as well as trading restrictions imposed by the SEHK and the Securities and Futures Commission (“SFC”). An all-rounded restructuring approach was swiftly adopted, which saw the JPLs implement a series of operational and group reorganisation. Necessary reshuffling and winding up of supernumerary subsidiaries were also carried out in an orderly manner.
Within a six month time frame, the JPLs were able to utilise their extensive experience in handling financial institutions to effectively stabilize Freeman FinTech’s financial situation, whilst maintaining the group’s core businesses in line with regulator guidance. The JPLs implemented a cross-border debt restructuring that spanned between Hong Kong and the Cayman Islands. By August 2020, the JPLs have secured commitments from a prospective investor – spearheaded by Dr. Cheng Chi Kong, Adrian (the third generation executive of a Hong Kong listed conglomerate, New World Development Co. Ltd.), due largely to Deloitte’s extensive networking and entrenched relationships. The restructuring includes injection of working capital loans, share subscriptions and scheme of arrangement under formal court procedures. Faced with a liability position of few billions, the JPLs carved out a deal structure that has proven to have met the tri-partied requirements and interests of the secured creditors, investor and the regulators.
On execution of the restructuring agreement, the JPLs delivered an overhauled business model for the group that vows to be viable and sustainable. By mid-2021, all major restrictions imposed on the operating subsidiaries by the SEHK and the SFC have been duly lifted. Freeman FinTech regained its listing status on the SEHK on 1 November 2021 – thereby becoming the first provisional liquidation case successfully achieved resumption, following the new delisting regime introduced since August 2018.