As the global economy faces unprecedented challenges, the intricacies of cross-border restructuring and insolvency (R&I) have come to the forefront of financial discourse. The tumultuous interplay of high inflation, geopolitical tensions, and evolving corporate structures has created a complex landscape for businesses operating internationally.
In this environment, the necessity for effective insolvency frameworks and innovative restructuring strategies has never been more critical. In fact, the conference held in Hong Kong in March by INSOL International (INSOL), the global federation of national associations of accountants and lawyers who specialize in turnaround and insolvency, highlighted the urgent need for legislative reform and enhanced collaboration across jurisdictions. Experts emphasized the vital role that the city plays in shaping global insolvency practices, particularly through innovative agreements and frameworks that facilitate cross-border cooperation.
“We are in a difficult economic period – with a shift towards a low-investment, low-growth and (on a geopolitical level) low-cooperation era,” explains Alastair Beveridge, Partner and Managing Director of AlixPartners’ global Turnaround and Restructuring practice, as well as President of INSOL.
Elaborating on this, he adds that the current economic climate is “a combination of the overlapping shocks of high inflation (which is only now beginning to moderate) and higher interest rates, tariff challenges, weakening global demand, low investment, business and consumer confidence, and increased geopolitical tensions” which has left the global market precariously balanced, striving to avoid a recession.
Indeed, the latest insights from Allianz Trade’s Global Insolvency Report, released on 18 March, projects a troubling rise in global business insolvencies, forecasting a 6 percent increase in 2025 and a further 3 percent in 2026. This would translate to an additional 6,800 insolvency filings in the United States and nearly 10,000 extra filings in Western Europe alone, with micro, small, and medium enterprises making up the bulk of these cases.
In this intricate world of international business, cross-border restructuring has become a critical discipline, says Ian Mann, Co-chair of the INSOL Hong Kong conference, Partner of international law firm, Harneys, and a member of the Institute’s Restructuring and Insolvency Faculty Executive Committee (RIFEC). “Companies are by definition international today. The rise of cross-border insolvencies is just a reflection of companies having globalized in decades earlier,” Mann says, highlighting the fundamental shift in corporate structures.
“If you have a multinational company with headquarters in the Cayman Islands, operations potentially in China, and listed in the United States, that’s an incredibly international company,” Mann says. When such companies face financial challenges, the restructuring process becomes intricate. “The courts of all those places absolutely need to be flying in formation to protect creditors, to protect investors,” he adds.
The need for legislative reform
Economic pressures have also accelerated the need for effective restructuring frameworks. Mann points to factors such as “the slowdown in the Chinese economy, higher inflation, and a post-COVID hangover,” which are creating unprecedented restructuring needs. More critically, he asserts that “geopolitics and the imposition of tariffs is going to completely change the way in which manufacturing, exports, and logistics are done,” adding significant financial complexities to the mix.
Daniel Chow, Senior Managing Director at FTI Consulting, and Chairman of the RIFEC, echoes these sentiments and focuses on Hong Kong’s unique situation. He argues that there is a great need for legislative improvements in Hong Kong’s legal framework to better support restructuring efforts in the region.
“We don’t have a modern corporate rescue regime in Hong Kong and only rely on the scheme of arrangement and common law recognition of other jurisdictions in the past decades,” Chow explains, highlighting that a draft bill has been pending for around 25 years. This absence of a formal rescue law hampers companies’ ability to restructure effectively.
“A proper rescue law in Hong Kong is like adding one more essential tool in our restructuring toolbox. It actually could improve the current restructuring regime and could save more companies from bankruptcy or help resolve more severe financial difficulties,” he explains, as it would provide essential legal protection and tools for businesses to focus on refinancing without interruption from creditor actions.
Equally important, Chow notes, is the introduction of an insolvent trading law. “This has been in the law for many other modern common law-governed restructuring jurisdictions for a long time, but Hong Kong still doesn’t have that.” Such legislation would hold directors accountable for their actions during financial difficulties, promoting more responsible corporate governance. “The adoption of corporate rescue legislations together with the introductions of insolvent trading laws would bring Hong Kong in line with other jurisdictions,” says Chow.
A restricted environment
Tiffany Wong, Managing Director with Alvarez & Marsal’s Restructuring Practice in Hong Kong, describes Hong Kong’s current restructuring environment as “quite restricted.”
She highlights the fundamental issue of lacking a formal restructuring regime, stating: “Without a formal restructuring regime, there’s simply no automatic stay on proceedings and moratorium.”
This gap means that companies in financial distress face immediate pressures from creditors, complicating their recovery options. In an environment where agility and responsiveness are crucial, the absence of such legal structures can severely hinder recovery efforts.
Wong also points to the geopolitical landscape, noting that “the uncertainty… particularly with international players, is enormous.” Multinational companies are increasingly exploring ways to restructure their businesses through what she calls “rationalization projects” to stay competitive amid global economic shifts.
As such, she sees innovative approaches emerging with businesses demonstrating creative cross-border restructuring strategies. Wong emphasizes that companies today are exploring alternative jurisdictions outside of Hong Kong for debt restructuring, reflecting a shift towards a more globalized approach to financial recovery.
Cross-border complexities
In this landscape, Phyllis McKenna, who recently retired from her role as the Official Receiver (OR), acknowledges significant challenges when it comes to cross-border insolvency.
Regarding the cooperation with the Mainland China, she explains, “We have common law; they are civil law. We are insolvency-focused; they are restructuring-focused,” underscoring the fundamental legal differences that complicate cooperation. “While we’re moving towards modified universalism, as a concept that we all think is great, I think when it actually comes to putting it into practice, it is quite difficult.” Central to the legal concept of “modified universalism” is the idea that it is fairer to all creditors if there is a unitary and universal liquidation, generally in the place of the company’s incorporation.
Achieving seamless cross-border insolvency cooperation, according to McKenna, requires a nuanced, patient approach that respects the unique characteristics of both legal systems while seeking common ground.
She is also an advocate for research and innovation in developing effective R&I solutions. A key recommendation she has is the critical need for empirical research. “We would love to see some data… what is that data that we need? Jobs saved, benefits added to the economy – things that are really tangible.”
“Companies are by definition international today. The rise of cross-border insolvencies is just a reflection of companies having globalized in decades earlier.”
However, McKenna recognizes that there are practical challenges. “There are obviously difficulties, as there are in any cross-border situation with different regimes, particularly in the determination of a debtor’s Centre of Main Interests.” This underscores the complexity of cross-border insolvency and the need for continued dialogue, mutual understanding, and innovative solutions, she says.
The Hon Madam Justice Linda Chan, Judge of the High Court in charge of the Companies and Bankruptcy List, notes that: “the corporate structures are also getting more and more complicated,” citing real estate companies as a prime example.
As an example, she explains that many Mainland Chinese property developers now use global loan structures to raise funds, creating intricate corporate networks that span multiple jurisdictions.
“Although strictly speaking, if you just look at the way the Ordinance operates, they [the noteholders] are not the person holding the legal right, and therefore they should not be regarded as creditors,” Judge Chan says, what this highlights is the complexities in defining who the stakeholders are.
The rise of digital assets
Judge Chan also points out that one of the most pressing issues that the industry faces today is the rise in digital assets. “Cryptocurrency and cyber assets are raising new issues that our Companies Court has to decide upon,” she says, referencing significant local cases involving collapsed cryptocurrency platform Gatecoin.
This necessitates addressing fundamental questions about the nature of these assets and the rights of account holders. As cryptocurrencies become more mainstream, the legal frameworks governing their treatment in insolvency proceedings must evolve to provide clear guidelines for stakeholders.
In discussing Hong Kong’s potential adoption of the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency, Judge Chan also emphasizes its strategic importance. “It’s a matter of perception,” she explains, noting that while Hong Kong’s existing laws are flexible, adopting the Model Law would signal alignment with international best practices. “We want to be seen to be aligned with other jurisdictions in insolvency matters, which is very important to financial investors.”
The impact of mutual recognition agreements
Along those lines, a highlight from this evolving landscape has been the groundbreaking bilateral arrangement Hong Kong secured with Mainland China in May 2021, known as the Record of Meeting on Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings.
Beveridge describes this development as instrumental in shaping other bilateral cooperation frameworks, building momentum towards cross-border insolvency cooperation and harmonization.
“In Re CEFC Shanghai, a landmark case in 2020, the Court of First Instance granted an order for recognition and assistance to liquidators of a Mainland China-incorporated company for the first time,” he notes, which helped pave the way for mutual recognition.
Judge Chan also discusses the promising mutual recognition arrangements with Mainland Chinese courts, currently limited to three pilot cities: Shanghai, Xiamen and Shenzhen.
“If we adopt this scheme more widely, it will be very useful,” she explains, emphasizing that it would streamline cross-border insolvency proceedings. This cooperation not only facilitates smoother processes for liquidators but also enhances the overall effectiveness of cross-border insolvency handling.
Referring back to the adoption of the Model Law, Beveridge underscores Hong Kong’s already strong culture of recognition and enforcement in cross-border insolvency matters, even without having a similar formal regime.
“Hong Kong has showcased how informal restructuring can work effectively – despite not having a statutory restructuring procedure,” he says. “This has not stopped Hong Kong from facilitating complex, multi-faceted informal creditor workouts and building a collectivist culture among creditors.” The ability to negotiate and reach consensus informally can be crucial during times of financial distress.
Mann agrees, highlighting the importance of international cooperation in this context. “The key for any cross-border restructuring is that courts work in unison,” reiterating his earlier message, while praising the relationship between Hong Kong and Mainland China in protecting creditors. This collaborative spirit is essential as businesses face increasingly complex international challenges.
“We want to be seen to be aligned with other jurisdictions in insolvency matters, which is very important to financial investors.”
Turning to bondholders, Wong explains that “the biggest challenge is whether their voice is adequately represented in restructuring negotiations.” She explains that the process is particularly complicated, as bondholders typically need to instruct trustees through complex legal mechanisms. “Many U.S. dollar bondholders require at least 25 percent of aggregate principal to be declared immediately payable where there is a default,” she notes, underscoring the delicate balance of power that exists.
Looking ahead, Wong believes the practitioner remuneration and talent retention are key to the sustainable development of the field.
Despite these challenges, Wong remains optimistic about the industry’s potential for innovation. “Practitioners are becoming more flexible and creative,” she notes, pointing to recent cross-border restructuring strategies that demonstrate the field’s adaptability.
Charting a professional course
In a world where financial landscapes shift with lightning speed, the field of restructuring and insolvency (R&I) offers plenty of opportunity for young professionals. As experts navigate the complexities of cross-border cases and evolving corporate structures, they offer invaluable advice for those looking to embark on this dynamic career path.
“You have to be extremely good with people,” says Ian Mann, Partner of international law firm Harneys, and a member of the Institute’s Restructuring and Insolvency Faculty Executive Committee. In an era where companies span continents, the ability to “persuade, cajole, and understand foreign laws” is crucial. Mann’s message is clear: there’s no one-size-fits-all approach to learning this intricate field.
Echoing this sentiment, Alastair Beveridge, President of INSOL International, urges newcomers to build connections and broaden their horizons. “Network, network, network – attend industry events, join professional organizations,” he advises.
This proactive approach not only fosters relationships but also cultivates a robust knowledge base. “Excel in your basic degrees and stay on top of market developments to remain ahead of the game,” Beveridge adds, highlighting the importance of continuous education.
The Hon Madam Justice Linda Chan, Judge of the High Court in charge of the Companies and Bankruptcy List, also paints an even more vibrant picture of the industry calling it “full of potential” citing that: “If I were to start over again, I would probably start in that area exclusively.”
She encourages young practitioners to embrace challenges and seize the wealth of learning opportunities available. “There’s a lot to learn. This is an area which has great value in building up experience that cannot easily be replaced,” Judge Chan asserts, emphasizing that practical skills are essential for managing complex cross-border cases.
As the R&I landscape continues to evolve, the call for creativity, adaptability, and collaboration resonates louder than ever. For those ready to dive into this field, experts promise that it will not be just a chance at professional growth, but an opportunity to play a pivotal role in the global economy’s recovery.
A platform for collaboration
The recent INSOL conference served as a powerful demonstration of international financial expertise and the importance of collaboration in the insolvency sector.
“INSOL has some of the very best practitioners from around the world on its boards and advisory committees to plan conferences. Judges attend, the World Bank attends, financiers attend,” Mann says.
He also emphasizes the conference’s significance this year. “The particular significance of INSOL this year was to showcase Hong Kong to the world as a global cross-border restructuring centre,” he explains. The impressive attendance of approximately 800 delegates underscores the global interest in Hong Kong’s financial landscape. This turnout not only reflects the relevance of the conference but also highlights the vital role Hong Kong continues to play on the international stage.
Chow couldn’t agree more, citing that despite challenges, Hong Kong remains a critical hub for international business. “Hong Kong is a very easily accessible location, and also still acting as a bridge between the China market and the Western market,” he says, noting that the city’s unique position is particularly valuable in an increasingly complex global financial landscape.
“Many entities in China, if they want to go out to invest overseas, they still use Hong Kong as the platform,” Chow explains. This role is supported by Hong Kong’s robust legal system and language capabilities, making it an ideal intermediary for international transactions.
“The particular significance of INSOL this year was to showcase Hong Kong to the world as a global cross-border restructuring centre.”
For this reason, Chow highlights the importance of ongoing efforts to improve cross-border recognition mechanisms. He explains that in a significant stride towards cross-border legal cooperation, Hong Kong and China have introduced two groundbreaking mutual recognition programmes.
The first, a recently implemented civil judgment and arbitration recognition programme, enables two-way enforcement of court judgments between the jurisdictions, allowing parties to enforce judgments without re-litigating entire cases.
The second, a liquidators’ power recognition pilot scheme launched in 2021, aims to provide mutual recognition of liquidators’ powers across jurisdictions. However, the implementation has been considered cautious and slightly behind expectations. “Three of eight cases between Hong Kong and China were fully approved and the others are in the process, but these initiatives represent important steps forward,” Chow says.
He also celebrates Hong Kong’s evolving landscape in financial reporting. “Given the latest requirements, many issues are becoming more transparent,” Chow explains. This increased transparency allows for earlier identification of potential financial issues.
By addressing legislative gaps and maintaining its strategic global position, he believes Hong Kong will continue to be a leader in cross-border R&I.
The future
Beveridge says that the pace of reform is expected to continue, especially in emerging markets, with a strong focus on environmental, social and governance (ESG) considerations and the development of pre-insolvency restructuring tools and the administration of insolvencies.
He believes that companies will continue to be pressured to meet ESG regulatory standards. This means that matters such as environmental sustainability and human rights are likely to feature more heavily in insolvency scenarios. Cross-border insolvency cases may need to consider not only the financial interests of creditors but also the broader impact of insolvency on stakeholders, including employees, communities, and the environment and the importance of these aspects differs jurisdiction to jurisdiction.
As the complexities of cross-border restructuring continue to evolve, professionals in this field must remain adaptable and informed, using learning opportunities such as the INSOL conferences and seminars to stay abreast of issues. The integration of mediation and alternative dispute resolution processes will likely play an increased role in restructuring efforts, Beveridge says. “Mediation may be used to help seek consensus among various stakeholders,” he says, indicating its potential in high-profile cross-border insolvency cases.
Beveridge urges professionals in the industry to be flexible. “There is a need to be agile – this is critical to help practitioners to navigate technological and global economic changes, broader macro shifts and global transitions.”
Celebrating a 40-year history
This year, the Hong Kong Institute of CPAs’ restructuring and insolvency (R&I) specialist group celebrates 40 years of shaping the city’s financial resilience.
The journey of the Restructuring and Insolvency Faculty (RIF), a recognized forum for R&I professionals in Hong Kong, began when Hong Kong’s economy demanded expertise in handling financial turmoil. The Insolvency Practitioners Committee (IPC) was established in 1985 and, in 1987, the IPC set up the Insolvency Interest Group (IIG) to be the base for the Institute’s membership of the global R&I body, INSOL International (INSOL). In 2008, the IPC and IIG merged to form the RIF.
The key roles of the RIF include providing facilities, services and support to assist faculty members in carrying out their work in the R&I field; promoting best practice in the field; and acting as the professional and public interest voice of the Institute in R&I, and of the R&I sector generally.
“We have well-regarded training programmes to equip accountants who are interested in developing their skills and becoming an R&I professional. And of course, even if you are already part of the R&I community, we run regular training seminars,” says Daniel Chow, Senior Managing Director at FTI Consulting, and Chairman of the RIF Executive Committee. He adds that to provide comprehensive support for members, the Institute collaborates with other professional organizations and groups domestically, such as the Law Society of Hong Kong and the local network of the International Women’s Insolvency and Restructuring Confederation, and also internationally, including INSOL and the recently-established Regional Restructuring and Insolvency Organizations Forum.
By collaborating with stakeholders, including with the government and the Hong Kong Official Receiver’s Office on insolvency policy and administration, the RIF can consistently represent the interests of members and the R&I sector.
It is also one of the largest member associations of INSOL. “A testament to this strong relationship was seen at INSOL’s annual conference held in Hong Kong in March, which attracted approximately 800 delegates, including around 200 from Hong Kong,” says Alastair Beveridge, President of INSOL. “Moreover, this collaboration fosters continuous professional development, networking opportunities, and advocacy for improved policies in the field, reinforcing the importance of a strong and cohesive R&I community in Hong Kong.”
Throughout its history, the RIF and its predecessors have played a major role in making R&I a key specialization for the accounting profession in Hong Kong. Experts like those in the RIF stabilize businesses, protect creditors, and drive recovery, blending financial acumen with legal insight.
