HONG KONG SAR, CHINA Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Ester Chow and Aditya Kurtakoti, Mayer Brown
7.8 Out-of-Court v In-Court Enforcement As discussed in 6.1 Enforcement of Collateral by Non-Bank Secured Lenders , there is no “typical restructuring” beyond a recognition that the prevalent form of restructuring is via infor - mal workouts. These will necessarily be situation specific and driven by a number of factors rang - ing from the commercial considerations around creditors’ recovery and the debt profile needed for the company to remain a going concern. However, it is not unusual for such arrangements to include debt-for-equity swaps, reprofiling of debt and the grant of new security. Being a consensual process, a work-out requires the co-operation of all stakeholders in order for it to be agreed and executed. A scheme of arrangement offers the advantages mentioned above, particularly the ability to over - ride dissenting minorities (subject to the condi - tions mentioned above). 7.9 Dissenting Lenders and Non- Consensual Restructurings In order for a scheme of arrangement to pass, it must be approved by 75% in value of participat - ing creditors and a majority in number of credi - tors in each class. As such, it is possible to pass a scheme of arrangement over the objections of any dissenting lenders provided that the approv - al threshold in each class has been satisfied. 7.10 Expedited Restructurings There is no formal statutory basis in Hong Kong for a pre-packaged restructuring. It is therefore more challenging to achieve a pre-packaged restructuring in Hong Kong than in other jurisdic -
tions where this type of restructuring procedure is provisioned for. A key challenge to pre-packaged restructuring in Hong Kong is the ruling of the court in Re Legend International Resorts Ltd [2006] 2 HKL - RD 192 where the court held that a provisional liquidator could not be appointed for the sole purpose of a restructuring or to avoid a winding up and that a pre-packaged restructuring is not a winding up but rather an alternative to winding up. This removes the ability of using the appoint - ment of a provisional liquidator and the mora - torium it brings as a primary means of creating the breathing space needed to pull together a pre-agreed scheme of arrangement. Nevertheless, pre-packaged restructurings are attempted in Hong Kong and can be achieved if properly structured with a willing cohort of credi - tors and on the basis of sound legal advice in order to deliver a well-executed and pre-pack - aged outcome. 8. Case Studies and Practical Insights 8.1 Notable Case Studies Private credit deals are by their nature private and confidential. The authors are not aware of any notable litigation having been reported in the public domain. 8.2 Lessons Learned
See 8.1 Notable Case Studies . 8.3 Application of Insights See 8.1 Notable Case Studies .
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