July 2021

In Re China Huiyuan Juice Group Limited [2020] HKCFI 2940, The Hong Kong Court of First Instance (“Court”) revisited the position of winding up an off-shore company listed in Hong Kong.


China Huiyuan Juice Group Limited (“Company”) is incorporated in the Cayman Islands and listed on the Main Board of Hong Kong Stock Exchange. It operates business involving manufacture and sale of fruit and vegetable concentrate, puree and juice beverages in Mainland China through subsidiaries incorporated in the Mainland (“Group”). Almost 100% of the Group ‘s revenues are generated by the Mainland subsidiaries.

The Petitioner issued a petition to wind-up the Company on the grounds of insolvency. There is no dispute that the Company is insolvent. The Company seeks an adjournment of the Petition until the end of this year in order to progress a restructuring of the Company’s debt. The Court considered the issue of whether the Court should exercise its jurisdiction under section 327 of the Companies Ordinance to wind up the Company which is incorporated off-shore.

Jurisdiction of Wind Up Off-shore Companies

The Court revisited the principle regarding the jurisdiction of Hong Kong Court to wind-up a listed offshore holding companies of Mainland business groups in Hong Kong. The Court continued to adopt the three core requirements summarized in the case Kam Leung Sui Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501:

1. there had to be a sufficient connection with Hong Kong, but this did not necessarily have to consist in the presence of assets within the jurisdiction;

2. there must be a reasonable possibility that the winding-up order would benefit those applying for it; and

3. the court must be able to exercise jurisdiction over one or more persons in the distribution of the company’s assets.

The Court remarked that it is well established that the listing status of a company in Hong Kong is sufficient to satisfy the first core requirement and commonly there is more than one creditor subject to the jurisdiction of the Hong Kong court, which is sufficient to satisfy the third core requirement. Therefore, the real issue was the second core requirement.

Listing Status and the Second Core Requirement

The Court followed the Court of Appeal’s judgment in Shangdong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd [2020] HKCA 670 that the second core requirement must be satisfied in all cases and that involves demonstrating a real benefit to the petitioner if a winding-up order is granted. A petitioner will not be required to identify with great precision what the benefit will be or quantify with exactness the value of the benefit. However, the petitioner must be able to point to a discernible and real benefit and that in order to satisfy the second core requirement, hypothetical benefits that potentially arise in all cases will not be sufficient.

As to whether the listing status per se would satisfy the second requirement, the Court further observed that it has become increasingly challenging to realise the value of a listing by changing a company’s capital structure to facilitate control of the company passing to an investor once a winding-up order has been made. Based on the Court’s recent observations, the Court opined that it is highly unlikely that the listed status of the Company if it is wound-up has any residual value, and that it is no longer sufficient to invite the court to assume that the value of a listing can be realised and realised at a value that proves to be more than an insignificant benefit to creditors.

The Court held that, if in future a petitioner wishes to rely on the value of the listing as the benefit that satisfies the second core requirement, it will be necessary for it to adduce evidence that demonstrates this and such evidence will have to establish that there is a real, not hypothetical prospect of the listing being realised for an amount that produces a meaningful return to creditors. The facts and matters relied on as demonstrating a real benefit will have to be recited in the petition and evidence adduced that prove the facts and matters. In addition, there must be evidence from a witness familiar with the current practice of the Stock Exchange of Hong Kong and the current value of a listed company will be required.

Recalcitrant Refusal to Pay Debts and the Second Core Requirement

Apart from the discussion on listing status, the Court also acknowledged, as held in Shangdong Chenming, the possibility of a benefit to the petitioner resulting from a winding-up order by virtue of the pressure that a liquidation in Hong Kong, or the prospect of such a liquidation, that would put on the company to settle the debt, where the company is solvent and the only reason for it not paying was recalcitrance.