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When do Hong Kong directors owe a duty to consider creditors’ interests?

  • Hong Kong
  • Litigation and dispute management
  • Mergers and acquisitions

19-10-2022

When do Hong Kong directors owe a duty to consider creditors’ interests?

Recent UK Supreme Court judgment confirms test for when directors owe a duty to consider creditor interests. This test is likely to apply to directors of Hong Kong companies.

In our briefing Illuminating the Twilight Zone: UK Supreme Court Sequana judgment, we discussed how, following the UK Supreme Court’s recent landmark judgment in BTI 2014 LLC v Sequana SA and others [2022] UKSC 25 (“BTI v Sequana”), a director’s fiduciary duty to act in the interests of the company in good faith may be modified to require them to consider or act in the interests of the company’s creditors (“creditor duty”) when the director knows, or ought to know, that an insolvent liquidation or administration of the company is probable.

This is a key decision providing much welcomed clarity in respect of directors’ duties, and its application is highly likely to extend to directors of Hong Kong companies, in particular companies facing financial difficulties.

Hong Kong directors’ duty to consider creditor’s interests

Lack of codification of fiduciary duties under the Hong Kong Companies Ordinance

In handing down the ruling in BTI v Sequana, the Supreme Court recognised that, as codified in the UK Companies Act’s, the director’s fiduciary duty to promote the success of the company for the benefit of its members is expressly subject to “any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company”.

In contrast, only a director’s duties of care, skill and diligence have been codified under the Hong Kong Companies Ordinance. Directors’ other duties remain fiduciary duties as defined in common law including the duties to act in good faith in the interests of the company, exercise powers for their proper purpose, and avoid conflicts of duty and interest. There is therefore no express provision in Hong Kong statute requiring directors to take into account the interests of creditors in the exercise of their fiduciary (or statutory) duties.

Creditor duty in Hong Kong common law

Notwithstanding the lack of an express legislative carve-in requiring directors to consider or act in the interests of creditors of a Hong Kong company, the creditor duty identified in BTI v Sequana is in fact a modification of an equivalent fiduciary duty long-established in Hong Kong. Lord Reed, in his judgment in BTI v Sequana, made express reference to a Hong Kong Court of Final Appeal (“CFA”) case Moulin Global Eyecare Holdings Ltd v Lee Sin Mei [2014] HKCFA 63 (“Moulin Global”), which confirmed the existence of a duty to consider creditor interests in Hong Kong.

In Moulin Global, one issue the CFA had to resolve in the context of a strike out application was whether a company would have any remedy against a director acting in breach of their fiduciary duty for sums paid away to one creditor at the expense of the other creditors, at a time when the company was already insolvent. The position in the lower courts (i.e. the Court of Appeal) was that when the company became insolvent, its directors owed a duty to have regard to the interests of creditors – and the CFA accepted that a case framed consistently with this proposition would be reasonably arguable.

Against this backdrop, the decision in BTI v Sequana is significant and remains likely to be treated by the Hong Kong courts as highly persuasive towards establishing under Hong Kong law: (i) that a creditor duty exists in common law prior to insolvency; and (ii) assuming such a duty exists, when that creditor duty would arise prior to insolvency (as further discussed below).

What does this mean for directors of Hong Kong companies?

While we are yet to see further judicial guidance on what exactly would constitute taking creditors’ interests into account, directors of Hong Kong businesses are advised to maintain good corporate governance and exercise greater caution in making decisions (e.g. whether to pay a lawful dividend). In particular, they should keep in mind that a creditor duty may well be found to arise as a matter of Hong Kong law prior to insolvency. In the expectation that such a duty arises, directors should exercise particular caution in any of the following circumstances:

  • when a company is insolvent, bordering on insolvency, or where an insolvent liquidation is probable but not inevitable, directors should be careful to consider and balance the interests of creditors as a whole against the shareholders’ interests; and

  • when the directors know or ought to know that an insolvent liquidation is inevitable, creditors’ interests will take precedence over shareholders’ interests.

For further information on the BTI v Sequana judgment, please refer to our earlier briefing here.

How Eversheds Sutherland can assist

Should you require advice on directors’ duties in Hong Kong and/or any other restructuring and insolvency matters, Eversheds Sutherland can leverage its market-leading strength and depth of experience in these areas to assist.

For more information or guidance, please get in touch with your usual Eversheds Sutherland contact, or one of the individuals below.

 

 


 

香港董事何时有责任考虑债权人的利益?

英国最高法院最近的判决确认了关于董事何时有责任考虑债权人利益的测试。这项测试可能适用于香港公司的董事。

在我们的简报《Illuminating the Twilight Zone: UK Supreme Court Sequana judgment》中,我们讨论了在英国最高法院最近对BTI 2014 LLC v Sequana SA and others [2022] UKSC 25(“BTI诉 Sequana”)作出具有里程碑意义的判决后,当董事知道或应该知道公司可能发生破产清算或管理时,董事为公司利益真诚行事的诚信责任可能被修改为要求他们为公司债权人的利益考虑或行事(“债权人责任”)。

这是一个重要的决定,就董事的责任作出了广受欢迎的澄清,其适用范围很可能扩大到香港公司的董事,特别是面临财务困难的公司。

香港董事考虑债权人利益的责任

香港《公司条例》中缺乏对诚信责任的成文法则

在对BTI诉Sequana一案作出判决时,最高法院承认,正如英国《公司法》所规定,董事为其成员的利益促进公司成功的诚信责任明确受制于 “任何要求董事在某些情况下考虑公司债权人的利益或为其利益行事的成文法则或法律规则”。

相比之下,香港《公司条例》只对董事以谨慎、技巧及努力行事有成文法则。董事的其他职责仍然是普通法中定义的受信责任,包括为公司利益真诚行事、为适当目的行使权力以及避免责任和利益冲突的责任。因此,香港法规中没有明文规定董事在行使其诚信(或法定)责任时要考虑债权人的利益。

香港普通法中的债权人责任

尽管没有明确的立法规定要求董事考虑香港公司债权人的利益或为其利益行事,但BTI诉Sequana案中确定的债权人责任实际上是对香港长期确立的同等诚信责任的修改。里德勋爵在BTI诉Sequana案的判词中明确提到了香港终审法院(“终审法院”)的一个案例Moulin Global Eyecare Holdings Ltd v Lee Sin Mei [2014] HKCFA 63(“Moulin Global”),该案确认了在香港存在考虑债权人利益的责任。

Moulin Global案中,终审法院必须在面对剔除状书申请的情况下解决的一个问题是,在公司已经破产的情况下,如果董事违反其诚信责任向一个债权人支付款项而牺牲了其他债权人的利益,公司是否有任何补救措施。下级法院(即上诉法院)的立场是,当公司破产时,其董事有责任考虑到债权人的利益——终审法院认同与这一主张相一致的案件是可以合理争辩的。

在此背景下,BTI诉Sequana案的判决意义重大,香港法院仍可能视其为极具说服力的判决,以便根据香港法律确立:(一) 普通法中存在破产前的债权人责任;以及(二) 假设存在这样的责任,该债权人责任何时会在破产前产生(如下文进一步讨论)。

这对香港公司的董事意味着什么?

虽然我们仍未看到进一步的司法指引,说明到底怎样才是将债权人的利益考虑在内,但我们建议香港公司的董事保持良好的公司管治,并在作出决定(例如是否派发合法的股息)时更加谨慎。他们尤其应紧记,在破产之前,根据香港法律,很可能会出现债权人的责任。在预期会产生这种责任的情况下,董事应在以下任何情况下特别谨慎:

  • 当公司破产、濒临破产或破产清算可能发生但并非不可避免时,董事应注意考虑并平衡债权人的整体利益和股东的利益;以及

  • 当董事知道或应该知道破产清算不可避免时,债权人的利益将优先于股东的利益。

关于BTI诉Sequana案判决的进一步信息,请参考我们先前的简报

安睿顺德伦如何协助您

如果您需要关于香港董事责任和/或任何其他重组和破产事务的法律意见,安睿顺德伦可以利用其在这些领域的市场领先实力和深度经验提供帮助。

如需更多信息或指导,请与您惯常的安睿联系人或以下人员联系: