A Historic Milestone for Mainland China-Hong Kong Cross-border Insolvency

A Historic Milestone for Mainland China-Hong Kong Cross-border Insolvency

A recently-signed Record of Meeting marks a milestone for cooperation between Mainland China and Hong Kong on cross-border insolvency issues. What is it about? And what does it mean for the future?

On 14 May 2021, the Supreme People’s Court of the People’s Republic of China (Mainland China) and the Government of the Hong Kong Special Administrative Region (HKSAR) reached a Record of Meeting on Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region. The agreement marks a milestone for a long-awaited cooperation arrangement between the Mainland and Hong Kong. Accordingly, the selected intermediate courts in Mainland China and HKSAR courts may mutually recognise and provide assistance to insolvency proceedings which have been opened in the the other party’s jurisdiction.

Recognition of Hong Kong proceedings in Mainland China

The Supreme People’s Court published the Opinion on Taking Forward a Pilot Measure in relation to the Recognition of and Assistance to Insolvency Proceedings in the HKSAR. Currently, three courts are selected as pilot courts when Hong Kong proceedings can seek recognition, namely, the intermediate people’s courts in Shanghai Municipality, Xiamen Municipality in Fujian Province and Shenzhen Municipality in Guangdong Province (Article 1 Opinion). Recognition can only be granted to Hong Kong proceedings in which Hong Kong is the debtor’s centre of main interests (COMI), and the COMI has been in Hong Kong for at least 6 months (Article 4 Opinion). In this opinion, Hong Kong insolvency proceedings refer to compulsory winding up, creditors’ voluntary winding up and schemes of arrangement promoted by a liquidator or provisional liquidator and sanctioned by a court of the HKSAR (Article 3 Opinion). Subsequent to recognition, Hong Kong administrators can perform the same duties within the territory of the Mainland as those of Mainland administrators (Article 14 Opinion). Also, upon the request of the Hong Kong administrators, the court may appoint a Mainland administrator to perform the duties and functions in insolvency proceedings (Article 15 Opinion). Other reliefs that may be granted by Mainland courts include the realisation of bankruptcy property, distribution of bankruptcy property, debt restructuring arrangement, termination of bankruptcy proceedings, etc. (Article 16 Opinion)

There are several circumstances in which the People’s Court may refuse to recognise a Hong Kong proceeding: (i) the COMI of the debtor is not (or has been for less than 6 months) in Hong Kong; (ii) Article 2 of the Enterprise Bankruptcy Law (the debtor cannot repay its debts due, its assets cannot repay all the debts, or the debtor apparently lacks the ability to repay its debts) is not satisfied; (iii) Mainland creditors are not treated equally; (iv) fraud; (v) other circumstances in which the Peoples’ Courts consider that recognition or assistance should not be rendered. In addition, the People’s Courts shall refuse to recognise or assist Hong Kong proceedings if the basic principles of the law of Mainland China are violated, or public order and good morals are offended (Article 18 Opinion).

Recognition of Mainland proceedings in Hong Kong

On the Hong Kong side, according to the Practical Guide on Procedures for a Mainland Administrator’s Application to the Hong Kong SAR Court for Recognition and Assistance, a Mainland bankruptcy administrator may file an application to the Court of First Instance of the High Court of the Hong Kong SAR. A letter of request from a Mainland court which appoints the bankruptcy administrator should be obtained before such an application is made (Article 1 Practical Guide). The administrator can then apply to the Court of First Instance by originating a summons with affidavit/affirmation evidence, on an ex parte basis, for a standard-form order (Article 2 Practical Guide). The remaining procedures for recognising a Mainland proceeding will follow traditional Hong Kong common law.


This Record of Meeting is not a statutory law; however, it paves the way for future cooperation between the Mainland and Hong Kong on cross-border insolvency issues. A distinct feature is the introduction of the concept – COMI. According to the Opinion, COMI is presumed to be the registration place of the debtor. In addition, the courts shall consider other factors such as the place of principal office, the principal place of business, and the place of principal assets (Article 4 Opinion). This seems to be in line with UNCITRAL Model Law on Cross-border Insolvency and has taken into account international developments such as the European Insolvency Regulation. However, this definition overlooks another criterion that has been widely accepted elsewhere, that is, that this centre must be ascertainable by creditors. Also, it is hard to predict how courts will determine COMI in actual cases, in particular, as many Chinese companies have their registration office in offshore jurisdictions but their operations in Mainland China or Hong Kong.

The Record of Meeting also does not mention the possibility of recognising a debtor’s ‘establishment’ in a non-main/secondary proceeding. The Opinion, though, confirms that there might be parallel proceedings in both the Mainland and Hong Kong, without distinguishing main or non-main/secondary proceedings. In parallel proceedings, administrators in the two jurisdictions should strengthen their communication and cooperation (Article 19 Opinion). Courts in the Mainland and Hong Kong are also supposed to cooperate (Article 1 Record of Meeting, Article 24 Opinion). However, there are no concrete rules on how and to what extent administrators and courts can cooperate.

A Pilot: What is the Way Forward?

It must be acknowledged that this is merely a temporary/ad hoc arrangement and currently can only be applied in three cities in Mainland China when the debtors’ principal assets are in the pilot areas, or when the debtor has a place of business or a representative office in the pilot areas (Article 5 Opinion). These are indeed baby steps, but certainly significant ones which lays out the overall framework for cooperation in Mainland-Hong Kong cross-border insolvency cases. Although quite a few issues are left unaddressed which definitely need further attention, this arrangement indicates China’s efforts to further deepen the international cooperation. It is anticipated that, with the Record of Meeting as a steppingstone, cross-border insolvency cases between the Mainland and Hong Kong and even beyond will blossom, posing challenges and opportunities for insolvency experts.


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