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02 Mar 2015

Assets realised by provisional liquidators chargeable with ad valorem fees


Re MF Global HK Limited and MF Global Holdings HK Limited (CACV 251/2012 and CACV 252/2012 heard together) – judgment dated 2 March 2015 

This appeal case clarifies that assets realised by provisional liquidators are chargeable with ad valorem fees. Ad valorem fees charged on asset realisations in the winding up of companies are used to finance the Official Receiver’s Office. It also explains in detail the various types of provisional liquidators under the Companies Ordinance and their respective roles. Hon Barma JA was the judge in the Court of Appeal giving the judgment, with the other two appeal judges Yuen JA and McWalters JA affirming. 


The two companies were part of the MF Global Group of commodity and security trading companies. Provisional liquidators were appointed before winding up orders were made, and the provisional liquidators remained in office until liquidators were later appointed. The Court made orders (the “Conversion Order”) that the liquidation of each of the companies be conducted as a creditors’ voluntary winding up (thus saving costs with a view to maximising the amount available to creditors). 

There were other ancillary orders sought at the same time and the only controversial application was the one concerning ad valorem fees. The provisional liquidators had made realisations up to the point of the Conversion Order and had paid those into the Companies Liquidation Account on a without prejudice basis. The provisional liquidators requested that the amount realised should be paid out from the Companies Liquidation Account without any deduction of ad valorem fees.

If ad valorem fees were chargeable, in this case the amounts would be substantial – some HK$2,550,000 (out of HK$171.5 million realised) in respect of MF Global Hong Kong Limited and HK$975,000 (out of HK$32 million realised) in respect of MF Global Holdings HK Limited.

At first instance

It was uncontroversial that asset realisations of “liquidators” are subject to ad valorem fees. According to section 2(1) of Companies Ordinance (Cap. 32) (the “Ordinance”), liquidator “includes a provisional liquidator holding such office by virtue of section 194”.

The provisional liquidators contended that as they were appointed under section 193 of the Ordinance, they were not holding office by virtue of section 194 and thus do not fall within the section 2(1) of the Ordinance.

Hon Harris J accepted this argument in reliance of the decision in Re Lehman Brothers Securities Asia Ltd (No. 2). In that case, Hon Barma J (as he then was) held that there was an ambiguity in relation to the phrase “holding office by virtue of section 194” and that having regard to the legislative history and parliamentary materials, the definition should be read as applying only to provisional liquidators appointed under section 194(1A) of the Ordinance (which, as will be explained below, are provisional liquidators appointed directly by the Official Receiver in summary cases).

The Official Receiver appealed against the decision of Hon Harris J in respect of the ad valorem fees.

Court of Appeal

Hon Barma JA analysed in his judgment the role of four types of provisional liquidators under the Ordinance, as follows:


Pre-winding up appointment under section 193 of the Ordinance

Their role:to preserve the company’s assets so that they are available for distribution if a winding up order is made, but not actually to realise them, except where this might be necessary to preserve their value.


Post-winding up appointments under section 194 of the Ordinance

(a) the Official Receiver becomes the provisional liquidator on the making of a winding up order until he or some other person becomes the liquidator;
(b) section 193 provisional liquidators shall continue to act as the provisional liquidator until he or some other person becomes the liquidator; and
(c) the Official Receiver (as a provisional liquidator pursuant to section 194(1)(a) of the Ordinance) may appoint one or more persons to be provisional liquidators in his place if he is of the opinion that the property of the company is not likely to exceed HK$200,000 in value.

Their role:to hold office temporarily pending the appointment of a liquidator at a time when it is known that the company is to be wound up, and can be regarded as being little different from the liquidator eventually appointed.


Hon Barma JA accepted that all three types of post-winding up provisional liquidators should be treated as essentially similar in nature and subject to the same treatment in the Ordinance. His Lordship decided that the interpretation placed on section 2(1) of the Ordinance in the case of Re Lehman Brothers Securities Asia Ltd (No. 2) should no longer be adopted. 

Despite the fact that a substantial portion of the realisations in this matter were effected before the winding up orders were made, Hon Barma JA did not accept that as a justification to exempt realisations from ad valorem fees. The reason is that the provisional liquidators (while in office under section 193) made and held such realisations for the purpose of preserving the assets of the two companies pending the outcome of the petitions. It is only after the making of the winding up order (and holding office by virtue of section 194) that the provisional liquidators would have brought such realisations to account in the respective liquidation.



Jamie Stranger

Jamie Stranger
Office managing partner Greater China

T:  +852 2533 2780 M:  +852 9354 4481 Email Jamie | Vcard Office:  Hong Kong

Alexander Tang

Alexander Tang

T:  +852 2533 2881 M:  Email Alexander | Vcard Office:  Hong Kong