Real world implications for cross-border insolvency
In a recent decision of the Supreme Court of Bermuda, the Court considered a winding-up petition and an ex parte application by North Mining Shares Company Limited (the Company) seeking the appointment of joint provisional liquidators (JPLs) on a light touch basis.
The Company is a publicly traded company listed on the Hong Kong Stock Exchange which was incorporated in Bermuda. The winding-up petition was based on the Company’s insolvency pursuant to the Bermudian Companies Act 1981. Prior to the presentation of the Bermudian petition, one of the Company’s creditors had petitioned the High Court of the Hong Kong Special Administrative Region (HK High Court) for the Company to be wound up. At the time of the hearing of the Bermudian application, the Hong Kong proceedings were live and a return hearing date was pending. The Company had tried to have the Hong Kong petition adjourned on the prospect of a creditor majority agreement to restructure.
In granting the Company’s applications for the appointment of JPLs on a light touch basis and for the letter of request for recognition of that appointment, the Court had regard to the wishes of the majority of the unsecured creditors. The Company’s creditors had been served with notice of the applications and 58 per cent of those creditors had expressed support for the Court’s appointment of JPLs on a light touch basis to support the restructuring of the Company’s debt. One of the Company’s creditors argued that it was prejudiced by the departure from an arrangement to pay it which had been sanctioned by the HK High Court but the Court held that the “possible prejudice to one creditor must be balanced by the overall position of the creditors at large.”
The Court was satisfied that the application for the appointment of JPLs was consistent with the spirit of comity and recognised that the HK High Court was seized with the liquidation of the Company.
The Company also sought a letter of request to the HK High Court for recognition of the proposed appointment of JPLs.
In approving the letter of request, the Court noted that there was no statutory framework for the issuing of a letter of request by a Bermudian court and on the issue of conflict of laws, observed that the HK High Court had ruled in favour of its jurisdictional governance and that no further challenge of jurisdiction had been made.
The case provides useful authority for offshore practitioners of the common sense jurisprudence of the Supreme Court of Bermuda in dealing with cross-border insolvency issues.