Introduction
The Cayman Islands and Hong Kong are closely intertwined jurisdictions. Cayman Islands companies often sit atop the corporate structure of businesses operating across Hong Kong and Mainland China. In fact, approximately 60 per cent of the companies listed in Hong Kong are incorporated in the Cayman Islands.[1] It is no surprise then that when liquidators are appointed in the Cayman Islands, they are regularly required to take steps in Hong Kong during the course of the liquidation – for example, to realise assets or take control of operating subsidiaries. Recognition from the Hong Kong courts is commonly put forward as a precondition to counterparties or local authorities acceding to requests from Cayman Islands liquidators to transfer assets or provide information.
Recognition in Hong Kong
While (like the Cayman Islands) Hong Kong has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, the Hong Kong courts have a common law jurisdiction to recognise and assist foreign liquidators. The case law has evolved significantly in recent years, with the test shifting from generally requiring the foreign representative to show that the insolvency process is taking place in the company’s place of incorporation to requiring the representative to show the process is taking place in the jurisdiction of the company’s centre of main interests (COMI).[2]
Now, to obtain recognition/assistance, the foreign representative must establish that (1) the foreign proceedings are collective insolvency proceedings; (2) the proceedings are being conducted in the jurisdiction of the company’s COMI; and (3) the assistance is necessary for the administration of the foreign winding up or the performance of the officeholder’s functions, and the relief is consistent with Hong Kong’s substantive law and public policy.[3]
Procedurally, faced with an increasing number of recognition applications from foreign liquidators, the Hong Kong courts developed a template form of recognition and assistance order in an effort to streamline the process,[4] and encouraged offshore judges to send letters of request consistent with that form of order. In Re Agritrade Resources Limited, a case where the Supreme Court of Bermuda did not do so, Harris J explained:[5]
“I have aimed to establish a process, which provides for quick, cost effective and, so far as possible, uncontroversial recognition and assistance. I have made clear in a number of decisions and also talks to the profession that it is important that the procedures and standard orders that have been developed are used. I have suggested that so far as possible, for example, the letters of request are drafted to be consistent with the Hong Kong procedure and order. I do not know whether in the present case the Chief Justice had been informed of the Hong Kong standard order and a letter of request sought which is consistent with it. I hope that in future this is what will occur and this decision is shown to judges in offshore jurisdictions in order that they understand the Hong Kong court’s approach.”
Re China GEM Fund
The decision in Re China GEM Fund IX L.P. arises in that context. In that case, the Cayman Islands liquidators encountered a familiar situation: they identified realisable assets in the form of listed shares held in a Hong Kong securities account. Before the broker would transfer those shares to the liquidators, it required them to obtain recognition in Hong Kong.[6] To facilitate such an application, the liquidators sought a letter of request from the Cayman Islands court in the standard form typically favoured by the Hong Kong judges.[7]
Asif J noted that whilst such a request would usually be uncontroversial,[8] the effect of seeking the standard recognition and assistance order here was that the liquidators were seeking “wide-ranging powers that these liquidators do not require.”[9] Here, recognition was sought for the specific, limited purpose of realising the listed shares. The Judge expressed the preliminary view that “the Grand Court should not ask the High Court of Hong Kong to grant powers which the liquidators do not properly require to complete their task, and which are therefore unnecessary.” Asif J went on, “for this court to request such unnecessary powers would risk being a trespass upon comity.”[10]
Having expressed that initial view, as well as inviting the liquidators to seek further advice from Hong Kong counsel, Asif J took the unusual (and perhaps novel) step of making a direct inquiry of Harris J of the Hong Kong court as to the appropriate course in the circumstances. The Judgment records:[11]
“In his response to my extrajudicial query, Harris J indicated that the standard form of order used in Hong Kong is preferable where a liquidator seeks a full range of powers, to make the processing of the request as streamlined as possible. However, he agreed that the terms of any request should be tailored to what is actually required, particularly where only narrow relief is needed.”
Having received such a response, Asif J adhered to his initial view and finalised a letter of request “with the limited powers that the liquidators actually need in order to take ownership of the shares in question, rather than the wider powers in the standard form of order for recognition of foreign liquidators that is generally used in Hong Kong.”[12]
The Judge then offered the following parting words of advice to liquidators and those advising them:[13]
“I suggest that practitioners in the Cayman Islands who need to seek recognition of liquidators by the High Court of Hong Kong should bear in mind in every case whether it is appropriate to seek the full range of powers and, if not, they should limit the scope of the recognition sought so that it accords with what the liquidators truly need to complete their task.”
Key Takeaways
Aside from the helpful guidance quoted directly above, the China GEM Fund decision is notable in two respects:
- First, it highlights the willingness of the courts of the Cayman Islands and Hong Kong to coordinate and cooperate, and specifically suggests that court-to-court communication may proceed informally and in general terms, beyond the circumstances in which a formal court-to-court protocol is adopted for a particular case.[14]
- Second, there is no suggestion in the Judgment that recognition of the liquidation of an exempted limited partnership – which is not a separate legal entity – would be an issue in Hong Kong. Assuming recognition is subsequently granted, it would represent another instance of a foreign court granting recognition of the liquidators of an exempted limited partnership, notwithstanding its unusual corporate form. Notably, in 2024 the US Bankruptcy Court for the Southern District of New York granted recognition to the liquidators of ECM Straits Fund I, LP.
[1] Re Aubit International (unrep., 4 Oct. 2023, Doyle J) at [134], citing Bloomberg figures from September 2023.
[2] Re Global Brands Group Holding Ltd [2022] HKCFI 1789 at [17], [31]-[42]. A more limited form of “managerial assistance” can be granted where the proceedings have been brought in the jurisdiction of the company’s place of incorporation, see for example Re Bull’s-Eye Limited [2024] HKCFI 3000 at [23].
[3] See for example Re Guangdong Overseas Construction Corporation [2023] HKCFI 1340 at [17](2).
[4] Re China Oil Gangran Energy Group Holdings Limited [2020] HKCFI 825 at [10]-[11].
[5] Re Agritrade Resources Limited [2020] HKCFI 1967 at [5].
[6] Re China GEM Fund IX L.P. [2025] CIGC (FSD) 100 (China GEM Fund) at [2]-[3].
[7] China GEM Fund at [5].
[8] The Cayman court relies on its inherent jurisdiction as the jurisdictional basis to issue such letters of request: Re Polarcus Ltd [2022 (2) CILR 49] at [18].
[9] China GEM Fund at [5].
[10] At [8].
[11] At [11].
[12] At [12].
[13] At [13].
[14] Pursuant to PD 1 of 2018 and PD 2 of 2019, the latter of which adopted the Judicial Insolvency Network Modalities For Court-To-Court Communications.
