Insolvency & Restructuring

Overview

Businesses may face financial difficulties as a result of the business cycle or as a result of structural issues. These difficulties often create conflicts between stakeholders which must often be resolved by reference to legal rights and obligations.

We have a broad range of experience in these situations, from advising shareholders and creditors on their rights on a debtor’s insolvency to advising businesses and their senior executives in or approaching the insolvency zone. We have represented clients in respect of voluntary debt restructurings as well as compulsory debt restructurings through schemes of arrangement. We have advised directors on their duties as they approach the insolvency zone as well as once the winding-up process has begun. We have advised on the enforcement of debt covenants and on the enforcement of security interests. We have represented clients in advancing or defending petitions to wind-up companies and on the rights and powers of liquidators and provisional liquidators.

We have substantial experience in the application of insolvency laws to clearing and settlement systems in the event of the insolvency of participants in the system.

Experience

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  • Representing one of the world's largest derivatives exchange and clearing house operators with a market capitalization of over USD65 billion in connection with statutory insolvency protection in connection with the trading and clearing of OTC derivatives

  • Representing a private company valued at USD2 billion in connection with a contractual dispute with a counterparty with PRC operations, the provisional liquidation of that counterparty and the enforcement of judgment

  • Representing one of the world's largest derivatives exchange and clearing house operators with a market capitalization of over USD65 billion in connection with statutory insolvency protection in connection with the trading and clearing of OTC derivatives

  • Representing a private company valued at USD2 billion in connection with a contractual dispute with a counterparty with PRC operations, the provisional liquidation of that counterparty and the enforcement of judgment

Insights

  • Provisional Liquidation for Restructuring: A review of the State of the law

    Whilst the Companies Ordinance in Hong Kong provides that a scheme of arrangement may be carried out for the purpose of a debt restructuring, it makes no provision for a moratorium on creditor enforcement processes during the time in which the scheme is in progress. For a time, the courts filled this legislative lacuna by placing companies into provisional liquidation and empowering the provisional liquidators to pursue a corporate rescue with the benefit of the statutory moratorium on creditor enforcement processes that is triggered upon a provisional liquidation. However, a 2006 decision of the Court of Appeal casts doubt on the viability of this approach. These doubts have lingered since then though the courts have continued from time to time to tolerate provisional liquidations for restructuring purposes. The recent decision in Re China Solar goes some way to allaying these doubts.

  • The PCCW Privatization: A Guide To The Applicable Law For Schemes Of Arrangement

    Allegations of share splitting in the proposed privatization of PCCW have raised an important question as to how the statutory majority to approve a scheme of arrangement should be determined. This question is significant both in the short-term for investors trading PCCW and in the long-term in the context of future schemes of arrangement. In this article, we examine the applicable laws and regulations with a view to providing hedge funds and other investors with guidance.

  • Distressed Debt In Hong Kong: An Insolvency Primer For Private Equity

    Recent shocks to the financial markets as well as deteriorating economic conditions have brought insolvency issues sharply back into focus. For some hedge funds and private equity funds, insolvency has come unwelcome in the form of a deteriorating financial condition of a portfolio company to whom loans have been made or whose debt the funds have acquired. In this article, we review basic Hong Kong insolvency law concepts and outline debt recovery options.