Twenty years after mainland firms began listing in Hong Kong, it is no surprise to see a growing number of cross-border liquidations, from which some Hong Kong professionals are making a tidy living.
"As long as a liquidator knows the tricks and trade secrets of how to get things done in China, he can arrange asset sales and bring the money out of the mainland to pay creditors or shareholders," said Alan Tang Chung-wah, a partner and head of specialist advisory services in the Hong Kong office of mainland accounting firm ShineWing. "I have done that for 30 years and still do it every day."
ShineWing has handled many cross-border liquidation cases and Tang, a Hong Kong-based accountant, has specialised in mainland-related bankruptcy cases for 30 years. His clients include Hong Kong and foreign investors who set up joint ventures or subsidiaries on the mainland, as well as collapsed Hong Kong-listed mainland firms.
While many people assumed companies sought to be wound up because they could not repay their debts, Tang said this was not always the case. "Besides financial troubles, many companies apply to be wound up because shareholders have disputes among themselves and seek to liquidate the company to divide its assets," he said.
Last month, the Securities and Futures Commission applied to wind up Hong Kong-listed mainland firm China Metal Recycling because it alleged the company had issued a misleading listing prospectus in 2009 and continued to maintain the false information. The Court of First Instance appointed provisional liquidators to investigate its books and records and take control of the company.
On the mainland, Tang said, he would need to go to local courts to apply to take over the mainland assets of a company as required by the country's bankruptcy law. Each local court would decide individually on the release of assets located in their city, and to attach the assets of a company with operations in 10 mainland cities would require applying to 10 local courts.
"In theory, it is the court that decides how to divide the assets of the company. But in reality it is the local governments and other local business partners who make the decision as the court takes their views seriously," Tang said.
The key to retrieving assets from the mainland is therefore to convince the local governments and local business partners that it is a good idea to deal with liquidators. "Many local officials and business partners are reasonable. As long as the liquidators can present them with a valid asset sales plan or a debt restructuring plan that can help to maintain the business and jobs for the local people, they co-operate with us," Tang said.
"In one case, a mainland business partner said he had waited for a long time for me to arrive, because only after the liquidators sign off on all the paper work can a business continue to operate and get its money out of the banks," he said.
China liquidations keep Hong Kong professionals busy