The Petitioner sought to wind up Trillion and R&F Properties, each part of the Guangzhou R&F Properties Co., Ltd group. The group, consisting of onshore and offshore entities (including in the British Virgin Islands), mainly engages in property and hotel development, and tourism, primarily operating in Mainland China.

Among other obligors, Trillion was a borrower, and R&F Properties a guarantor, under a US$504 million loan agreement with the Petitioner and three other lenders. The debtors defaulted on repayment of the loan, secured by extensive security, granted by Trillion, R&F Properties and others, which was due in October 2023. The Petitioner served statutory demands, which were not satisfied, before petitioning to wind up the companies. Notably, the other lenders, holding 82 per cent of the loan, opposed the winding-up petitions.

The issue before the Court was whether a creditor, whose debt is secured by effectively all the assets of the companies, has any real interest in seeking a winding-up order against the companies.

The Court dismissed the petitions and ordered costs against the Petitioner, on the basis that the Petitioner and other lenders, as secured creditors, could execute against all of Trillion’s and R&F Properties’ secured assets to repay the loan. Further, the Petitioner could not demonstrate any other interest in winding up the companies and had no intention of surrendering its security. The Court, therefore, found no benefit in making a winding-up order, as there would be no other unencumbered assets for liquidators to collect in or realise for unsecured creditors.

Although Harneys does not advise on Hong Kong law, this decision highlights important common law principles. Whilst a secured creditor has standing to apply for liquidators on insolvency grounds (see for example our blog on Re G3 Exploration), a court may dismiss a winding-up petition if the company has no assets available to discharge the unsecured creditors and the petitioner has no other interest in the liquidation.

In the BVI, section 157(1)(c) of the Insolvency Act, Revised Edition 2020 requires the court to set aside a statutory demand if it is satisfied that the creditor holds a security interest in respect of the debt claimed and the security's value matches or exceeds the statutory demand amount (less the US$2,000 prescribed minimum). Of course, it is not to say that the court will not take into account other considerations. However, in relation to a liquidation application, a court cannot refuse to appoint a liquidator merely because all assets are secured or the company has no assets (section 167(2) of the Insolvency Act). It must be inferred that other considerations may arise where a secured creditor has applied for the appointment of liquidators, including the wishes of other creditors, in order to persuade the court not to exercise its discretion to wind up a company.

In cases of insolvency, secured creditors have a limited interest in the liquidation beyond their interest in the secured assets. In practice a secured creditor’s only interest in the liquidation will be if there is a shortfall in realisation of the secured assets. The appointment of a liquidator does not impinge on a secured creditor’s right to realise its security (section 175(2) of the Insolvency Act with a similar provision in the Cayman Islands under section 142(1) of the Companies Act (2025 Revision)).