These types of cases have become fairly common in China, where companies declare bankruptcy but then transfer their assets to overseas subsidiaries, with Hong Kong a top destination, reports The South China Morning Post.
The Shenzhen Bankruptcy Court will help Chinese officials track down assets of businesses that have declared bankruptcy but then moved their assets to the special administrative region.
The court was set up in response to the growing number of bankruptcy cases, with 6,647 in the first 10 months of 2018 and 6,257 in 2017.
Setting up a hamstrung court?
Over the past few years, China and Hong Kong have signed several cooperation agreements; however, there are currently no rules about investigating cross-border cases.
Previously, it was the Shenzhen Intermediate People’s Court that used to deal with these cases; but, due to the growing number, China has created a specialist court.
Liu Guixiang, member of the judicial committee of the Chinese Supreme People’s Court, said that the international insolvency legal system needed to be optimised and improved and that the establishment of a special court was a step in that direction.
However, Hong Kong remains outside of the Shenzhen Bankruptcy Court’s jurisdiction. This means that the Shenzhen and the Hong Kong courts are not legally obliged to recognise insolvency orders.
Under the current ‘one country, two systems’ arrangement, Hong Kong will remain judicially independent until at least 2047.
Therefore, unlike matrimonial and other civil orders, a ruling in Shenzhen Bankruptcy Court will not apply to Hong Kong and the same would happen the other way around.