First in Shanghai: Our Firm Recognized by Hong Kong High Court Under Mainland-HK Bankruptcy Cooperation Framework

-PART ONE-

Case Background

On September 30, 2024, the Shanghai No. 3 Intermediate People's Court accepted the bankruptcy liquidation case of Shanghai Sheng Yi Ke Cheng Industrial Co., Ltd. On the same day, the Court appointed our firm as the bankruptcy administrator.

The company has two subsidiaries in Hong Kong, which indirectly hold high-value underlying assets through another investment. We found that the overseas assets were sold. The proceeds were transferred to the two Hong Kong subsidiaries via capital reduction and remain in their bank accounts.

Due to differences between mainland and Hong Kong judicial systems, the administrator encountered strong resistance from the original management in taking over the two Hong Kong subsidiaries. Communication and coordination with relevant third-party institutions and authorities in Hong Kong also faced significant obstacles. To protect the legitimate rights and interests of bankruptcy creditors, our firm, after careful assessment and reporting to the Shanghai No. 3 Intermediate People's Court, decided to apply to the Hong Kong High Court for recognition of the administrator's status and judicial assistance. This aimed to effectively take control of the two Hong Kong subsidiaries and ensure that proceeds from the overseas investment could be lawfully and orderly included in the bankruptcy estate.

Through the efforts of our firm and our overseas cooperation team, we successfully obtained recognition and assistance from the Hong Kong High Court regarding the administrator's status and the debtor's bankruptcy proceedings. Our firm is now empowered to conduct asset investigation and takeover in Hong Kong.

-PART TWO-

Case Progress

As mentioned, the debtor's Hong Kong subsidiaries hold significant asset value. Given the debtor's limited assets in the mainland and the lack of cooperation from relevant personnel both domestically and abroad, the administrator was unable to complete the takeover. Therefore, obtaining mutual recognition and recovering the equity value of the overseas subsidiaries is crucial to protecting the rights of all creditors.

To ensure the smooth progress of the debtor's bankruptcy proceedings and to recover the equity value as soon as possible, the administrator applied to the Shanghai No. 3 Intermediate People's Court for a letter of request. The Court issued the "Letter of Request for Judicial Assistance" on February 7, 2025. The administrator then submitted a recognition application to the Hong Kong High Court. On April 24, 2025, the Hong Kong High Court held an oral hearing. Based on thorough preparation by the administrator and the Hong Kong cooperation team, the Hong Kong High Court orally approved recognition of the administrator's status and the debtor's bankruptcy proceedings during the hearing.

On April 28, 2025, the Hong Kong High Court formally issued Order HCMP 298/2025, granting our firm the authority to exercise a series of bankruptcy administrator powers in Hong Kong. According to public information, this is the first case in Shanghai to obtain recognition and assistance from the Hong Kong High Court since the signing of the "Summary of Meetings between the Supreme People's Court and the Government of the Hong Kong Special Administrative Region on Mutual Recognition and Assistance in Bankruptcy Proceedings" (hereinafter referred to as the "Summary of Meetings"). Our firm will continue to work with Hong Kong cooperative institutions to recover the equity of the subsidiaries and adopt various measures to maximize the protection of creditors' rights.

-PART THREE-

Significance of the Case

Through efficient collaboration between our firm and our partners, the assistance order from the Hong Kong High Court was obtained in just four months, effectively safeguarding the legitimate rights and interests of creditors. The success of this case marks a substantive step forward in cross-border bankruptcy cooperation between Shanghai and Hong Kong, providing practical content for the application of the Summary of Meetings. It further strengthens judicial cooperation and mutual trust between Shanghai and Hong Kong courts in the field of cross-border bankruptcy, contributing "Shanghai wisdom" and "Shanghai speed" to the development of an internationally aligned cross-border bankruptcy system.

The recognition of mainland bankruptcy proceedings and the appointment of administrators by the Hong Kong court reflects the flexibility of the common law system in handling cross-border bankruptcy cases. Such recognition provides precedent for mutual recognition of bankruptcy proceedings between the mainland and Hong Kong and may serve as a reference for similar cases in the future, reducing judicial barriers in cross-border debt resolution. Additionally, the Hong Kong court's direct recognition of the mainland administrator avoids the duplication of costs associated with initiating separate bankruptcy proceedings in the mainland and Hong Kong, accelerating asset integration and debt repayment. For international creditors, a unified bankruptcy process reduces jurisdictional disputes and enhances transparency in claims filing and distribution.

As an international financial center, Hong Kong's recognition of mainland bankruptcy proceedings sends a positive signal to global investors. It demonstrates that cross-border debt disputes involving mainland Chinese enterprises can be resolved through efficient and predictable legal channels. This is particularly important for attracting foreign investment into the mainland market, especially in industries such as real estate and technology, where corporate restructuring or bankruptcy risks are higher.

-PART FOUR-

Case Summary

This case is not only a model of cross-border bankruptcy judicial cooperation but also a microcosm of the integration of mainland and Hong Kong legal systems. At the judicial level, it provides a replicable precedent for handling cross-border bankruptcy cases and gradually contributes to the formation of a standardized process in the Hong Kong court for dealing with cross-border bankruptcy of mainland enterprises (e.g., requirements for evidence submission, qualification review of administrators), offering clear guidance for future cases. At the economic level, it enhances international investors' confidence in cross-border debt resolution involving Chinese enterprises and promotes capital flow. At the professional level, it generates new demand for cross-border bankruptcy services and drives the specialization and upgrading of legal professionals and institutions.

The successful handling of this case demonstrates our firm's breakthrough in cross-border bankruptcy legal services and highlights our professional competence and practical capabilities as a leading legal service provider in the bankruptcy field. Throughout the process, our team showcased efficient handling, precise judgment, and a deep understanding of international rules in cross-border bankruptcy matters, providing valuable experience for future cases.

K-Insight will continue to actively participate in cross-border bankruptcy legal practices with greater engagement. We will strengthen cooperation with international legal institutions, continuously improve the professional standards of cross-border legal services, and strive to provide enterprises and creditors with more efficient, reliable, and comprehensive legal solutions. At the same time, we will actively monitor the latest developments in cross-border bankruptcy, integrate international best practices with local experience, and contribute to the improvement of the cross-border bankruptcy legal system.

Through sustained professional dedication and innovative practice, our firm will support the continuous optimization of a law-based and internationally oriented business environment, provide strong support for judicial cooperation and institutional development in cross-border bankruptcy, and contribute to the construction of a fairer, more transparent, and more efficient international business order.