Over the past few years, the Hong Kong Court has seen a significant increase in the number of winding-up petitions with respect to listed holding companies of Mainland business groups. These holding companies are usually incorporated in Hong Kong or offshore jurisdictions like the British Virgin Islands, Bermuda or the Cayman Islands. However, due to the lack of a statutory framework governing Hong Kong and Mainland cross-border restructuring and insolvency, it has been notoriously difficult to administer and implement group-wide liquidations or corporate rescues where a significant portion of the assets are located in the Mainland.

The common law power of assistance

In the absence of a statutory framework, the Hong Kong Court has been pursuing cooperation in cross-border insolvency matters through the flexible application of English common law principles. The common law assistance is, however, not without limit. Liquidators can only do what they would be entitled to do under the laws by which they are appointed, and only when it is necessary for the performance of the officeholder’s function.

Furthermore, until a 2019 decision recognizing Japanese insolvency proceedings in Re Mr Kaoru Takamatsu, such recognition was limited to insolvency proceedings commenced in common law jurisdictions.

Since that decision, the Hong Kong Court granted recognition and assistance to Mainland liquidators in 2020 and restated the criteria that must be satisfied before recognition and assistance will be granted:

(a) The foreign insolvency proceedings are collective insolvency proceedings; and
(b) The foreign insolvency proceedings are opened in the company’s country of incorporation.

Provided these criteria are satisfied, the Hong Kong Court may recognize insolvency proceedings opened in a civil law jurisdiction.

However, in spite of these recent developments and the various techniques developed for handling cross-border insolvencies in Hong Kong, the lack of a statutory framework, nevertheless, remains unsatisfactory, particularly in light of the increasing number of corporate group collapses in recent years.

It is therefore exciting to see that on 14 May, the Mainland Supreme People’s Court (SPC) and the Hong Kong government signed the “Record of Meeting of the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region on the Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region.”

Since then, the SPC has formulated the “The Supreme People’s Court’s Opinion on Taking Forward a Pilot Measure in relation to the Recognition of and Assistance to Insolvency Proceedings in the Hong Kong Special Administrative Region.” The pilot programme will be implemented in Hong Kong and a number of pilot areas in the Mainland such as Shanghai, Xiamen and Shenzhen, which are among the most popular choices for investments from Hong Kong. It is expected that with sustained improvements, the programme will be gradually extended beyond the pilot areas over time.

The pilot programme

The pilot programme allows liquidators from Hong Kong and the Mainland to apply to the relevant Hong Kong or Mainland court for recognition of insolvency proceedings and assistance for the discharge of their duties as a liquidator or provisional liquidator. It is noteworthy that the insolvency proceedings include not only winding-up proceedings but also corporate debt restructuring proceedings in Hong Kong and reorganization/compromise proceedings brought under the Enterprise Bankruptcy Law of the People’s Republic of China.

The procedures for and manner in which applications for recognition and assistance are to be made will be governed by the relevant provisions of the requested place. The Hong Kong government has issued a practical guide for the procedures in relation to the application for recognition and assistance.


Given the ever strengthening economic and financial ties between Hong Kong and the Mainland, coordination in cross-border liquidation and corporate rescues is crucial, and has been long overdue. The statutory framework, which allows and facilitates the mutual recognition of and assistance to liquidations and corporate rescues between Hong Kong and the Mainland, is an important step to improve the protection of investors and creditors, whether in Hong Kong or the Mainland, in relation to their investments in corporate groups with cross-border business. In particular, Hong Kong has become the only jurisdiction outside the Mainland to have established a cooperation mechanism for mutual recognition of and assistance to insolvency proceedings with the Mainland. An orderly and efficient cross-boundary insolvency and debt restructuring cooperation mechanism between the Mainland and Hong Kong also gives additional assurance to creditors and investors, facilitates lending and investment, thus further enhancing the investment and business environment in the two places. It is earnestly expected that the pilot programme could be effectively implemented and eventually extended to more locations in the Mainland.

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