Harneys reported on the unveiling of the Cooperation Mechanism on 14 May 2021 here.

In the first case, Ozner Water International Holding Limited (In Liquidation) [2022] HKCFI 363, liquidators for Ozner Water, applied for a letter of request from the Hong Kong Court to the Shenzhen Intermediate People’s Court to seek recognition in Mainland China under the Cooperation Mechanism. This was the third application by Hong Kong liquidators under the Cooperation Mechanism, but the first application where the entity concerned was not a Hong Kong company but incorporated offshore. Ozner Water is an investment holding company incorporated in the Caymans Islands and registered under Part 16 of the Companies Ordinance as a non-Hong Kong company since 2014, with its principal place of business in Hong Kong. Although publicly listed company on the Hong Kong Stock Exchange, trading was suspended in March 2021.

Ozner Water’s subsidiaries are located in Mainland China focussing on water purification services, air sanitization services and supply chain services. The liquidators, appointed by the Hong Kong Court on a bank creditor’s petition, needed to obtain recognition and assistance under the Cooperation Mechanism to take possession and deal with Ozner Water’s assets located in Shenzhen.

On 27 January 2022, the Hong Kong Court granted the liquidators’ application. When considering whether this was a proper case for a letter of request to be issued by the Hong Kong Court, the Court had to be satisfied that amongst other things, Ozner Water’s centre of main interests (COMI) was located in Hong Kong and that there were assets in Mainland China which needed to be got in, such that the Shenzhen Court was the most appropriate forum for the determination of the Liquidators’ powers over those assets. Despite being a Cayman Islands company, since its incorporation Ozner Water had always been run out of Hong Kong; accordingly COMI was found to be in Hong Kong and the application was granted.

In the second case, Hong Kong Fresh Water International Group Limited (In Liquidation) [2022] HKCFI 924, HK Fresh Water, incorporated in Hong Kong, being a subsidiary of Ozner Water, is an intermediate holding company with its primary assets in Mainland China. Those assets consisted of shareholdings in four wholly-owned subsidiaries incorporated in Shanghai and a subsidiary in Shaanxi province. Liquidators for HK Fresh Water applied for a letter of request from the Hong Kong Court to the Shanghai Court seeking recognition, in circumstances where the liquidators’ investigation was said to have apparently unearthed, amongst other things, evidence of the subsidiaries’ management diverting business. This was the fourth application by the liquidators under the Cooperation Mechanism, but the first application to the Shanghai Court (all three previous letters of request, including the earlier one concerning Ozner Water, were directed to the Shenzhen Intermediate People’s Court).

On 6 April 2022, the Hong Kong Court granted the liquidators’ application. On COMI, the Hong Kong Court found that since liquidators were appointed in March 2021, HK Fresh Water’s affairs had been managed in Hong Kong. This was enough to satisfy the COMI test under the Cooperation Mechanism, which requires COMI to have been in Hong Kong for six months before making the application.

The above two liquidation cases demonstrate insolvency practitioners' growing use and familiarity in the cross-border recognition and assistance Cooperation Mechanism between Hong Kong and Mainland China.