Cross border assistance as a restructuring device for Hong Kong: the case for its retention

Abstract

An overwhelming majority of companies listed in Hong Kong are incorporated in Bermuda/Caribbean jurisdictions. When these firms falter, insolvency proceedings are often commenced in Hong Kong. The debtor who wishes to restructure its debts will need to have enforcement actions stayed. Hong Kong does not have a statutory moratorium structure for restructuring purposes. Between 2018 and 2021, Hong Kong’s Companies Court addressed this difficulty by granting cross-border assistance, in the form of, inter alia, a stay order, to the debtor’s offshore officeholders, whose appointment triggers a stay for restructuring purposes. The Court has recently decided to cease the use of this method. This paper assesses this decision by, inter alia, comparing the stay mechanism in the UNCITRAL Model Law on Cross Border Insolvency. It concludes that it is possible, and desirable, to continue the use of the cross-border assistance method without jeopardising the position of the affected parties.