Company and Insolvency — Court of Appeal addresses second threshold requirement for winding up foreign company and allows appeal against winding-up order

Introduction

On 16 June 2025, the Court of Appeal handed down judgment in Re Up Energy Development Group Ltd [2025] HKCA 555, allowing an opposing creditor’s appeal against a winding-up order made by Linda Chan J against Up Energy Development Group Ltd (“Company”). Barma JA (giving the Judgment of the Court) addressed the second threshold requirement for the Hong Kong court to exercise its power to wind up a foreign company – namely, whether there is a reasonable possibility that the winding-up order would benefit those applying for it. The successful Appellant was represented by Anson Wong Yu Yat (led by Audrey Eu, SC).

Background

The Company was incorporated in Bermuda and established a principal place of business in Hong Kong, with its shares listed on the Main Board of The Stock Exchange of Hong Kong Ltd (“HKEx”). The Listing Committee of HKEx decided on 6 April 2020 to delist the Company. That decision was upheld by the Listing (Review) Committee and finally by the Listing Appeals Committee on 3 May 2021.

HEC Securities Ltd (subsequently renamed Seekers Markets Ltd) (“Petitioner”), which was owed HK$230 million under convertible notes issued by the Company, presented a winding-up petition (“Petition”) against the Company in Hong Kong on the ground of insolvency. Another creditor, Credit Suisse AG, Singapore Branch (“CS”), presented a winding-up petition against the Company in the Supreme Court of Bermuda (“Bermuda court”). CS also filed a notice of intention to appear and support the Petition in the winding-up proceedings in Hong Kong.

The Petition

Shortly before the hearing of the Petition listed on 10 January 2022, the Company and the Petitioner filed a consent summons seeking the dismissal of the Petition. On 7 January 2022 Linda Chan J indicated by letter to the parties that she was not minded to dismiss the Petition and took the view that a winding-up order should be made “in light of the insolvency state of the Company and the absence of a viable scheme to compromise the indebtedness”. The Petition was adjourned twice for the parties to address several questions raised by the judge. Meanwhile, on 11 March 2022, the Bermuda court made an order to wind up the Company.

The Petition was finally heard on 1 April 2022. The position of the Petitioner was no longer that the Petition should be dismissed as sought in the consent summons of January 2022, but that a winding up order should be made in Hong Kong, ancillary to the Bermuda liquidation. It was submitted that there were material advantages to the liquidators (and hence the creditors) for an ancillary winding up to take place in Hong Kong as opposed to those liquidators operating under a recognition order in Hong Kong. One of the opposing creditors, Integrated Capital (Asia) Limited (“Opposing Creditor”) appeared at the hearing to oppose the Petition, on the principal ground that the second threshold requirement was not satisfied.

On 6 May 2022, Linda Chan J made a winding-up order against the Company, holding that the Petitioner had demonstrated that there was a reasonable possibility of benefit to the creditors if a winding-up order were to be made and had thus satisfied the second threshold requirement.

The Appeal

The Opposing Creditor’s appeal is primarily based on the contention that the judge was wrong to conclude that the second threshold requirement for the winding up of a foreign company was satisfied.

In allowing the appeal, the Court of Appeal emphasised that in order to satisfy the second threshold requirement, the benefit has to be a real possibility, rather than a merely theoretical one. The Court accepted the Opposing Creditor’s submission that if the availability of the “full suite of powers” under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) will of itself give rise to a real possibility of benefit, then the second threshold requirement is entirely otiose as it will automatically be met in every case; and if it is said that the full statutory armoury of powers is sufficient to satisfy the second threshold requirement so long as there is a sufficient connection with Hong Kong (such as where the company is listed here), this will effectively mean that the second requirement is subsumed under the first.

In the Court’s view:

(1) the second threshold requirement is not satisfied by a petitioner simply saying there are greater powers available to a liquidator in Hong Kong if the company is wound up here as well;

(2) it is not sufficient for a petitioner to say that he is owed a debt which is not paid and would like it to be recovered and would also like to find out why it has not been paid. Otherwise every arm’s length creditor can satisfy the second threshold requirement in this way, which is not the law; and

(3) there cannot be any presumption that the threshold requirements would be met in the case of a Hong Kong listed company.

The Court of Appeal’s judgment provides useful guidance on the second threshold requirement for the Hong Kong court to exercise its power to wind up a foreign company. It is also a rare case in which a winding-up order made by the Court of First Instance is overturned on appeal.

 

Anson Wong Yu Yat

“Anson is very comprehensive and creative in his research and very meticulous in his written work. His strength lies in his refusal to give up and his insistence in trying to find solutions around problems or obstacles to his client’s case.”
Legal 500 Asia-Pacific 2025, Commercial Disputes & Administrative and Public Law — Leading Juniors

Anson has appeared in more than 150 court judgments (including 18 cases in the Court of Final Appeal with 13 substantive appeals) over the mere span of 10 years’ call, reflecting the exceptional wealth of experience and exposure in civil litigation for his seniority. 

Anson has developed a broad civil practice with a growing practice in insolvency and bankruptcy matters in recent years. He is experienced in handling complex questions of law, including those of great general or public importance which reached the Court of Final Appeal. For example, he has recently appeared in (among others) three civil appeals before the Court of Final Appeal dealing with important questions concerning insolvency matters, land law and equity, service out of jurisdiction and statutory interpretation. 

Visit Anson’s profile for more details.

This article was first published on 30 June 2025.

Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photographs which appear in this article are included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related. The views and opinions expressed in this article/material are solely those of the members authoring it and do not necessarily reflect the official policy or position of Denis Chang’s Chambers, or of any other member or members of Denis Chang’s Chambers.