Federal Court: Shandong Ruyi Carrying On Business Australia, Winding Up Ordered

• As of September 3, 2026, independent verification of a reported Federal Court ruling on September 2, 2026, to wind up Chinese textile group Shandong Ruyi, could not be found.
• The original article stated the court found that Ruyi's repeated, large-volume purchases of Australian cotton and wool, including from its Cubbie Station property, constituted carrying on business.
• Additional factors cited in the original article included an informal 'Ruyi Australia Group' management team and Ruyi treating an Australian subsidiary as its own trading arm, paying its bills and using its assets for other Ruyi companies' debts.
• The reported decision would enable a liquidator to collect Ruyi's Australian assets, primarily a loan account in a local subsidiary, to satisfy a $28 million debt from Chinese court judgments.
• The reported ruling would broaden the interpretation of 'carrying on business' for foreign companies in Australia, extending it beyond sales to include significant purchasing activities and operational control.

The Federal Court explicitly stated that buying from Australia, not just selling into it, could amount to carrying on business.

As of September 3, 2026, independent verification of a decision reportedly handed down on September 2, 2026, in the case of Shenzhen Xinhe Hongshi Investment & Consultancy Co Ltd v Shandong Ruyi Technology Group Co Ltd (No 3) [2026] FCA 1214, ordering the winding up of Shandong Ruyi, could not be found in public records or news reports. An earlier related case between the parties, Shenzhen Xinhe Hongshi Investment and Consultancy Co Ltd v Shandong Ruyi Technology Group Co Ltd [2025] FCA 860, involved the dismissal of an interlocutory application on July 30, 2025. The original article stated that this significant decision found that Ruyi's extensive purchasing activities and operational structures within Australia met the criteria for local legal jurisdiction. The plaintiff, Shenzhen Xinhe Hongshi Investment & Consultancy Co Ltd, sought to enforce Chinese court judgments against Ruyi, which amounted to approximately $28 million as of March 6, 2026. While the Foreign Judgments Act 1991 (Cth) does not cover mainland Chinese courts for direct enforcement, the plaintiff successfully relied on common law rules. The Foreign Judgments Act 1991 (Cth) remains in force today. Ruyi did not dispute the validity of the judgments or the outstanding debt, making the central issue whether it was carrying on business in Australia, a prerequisite for winding up a foreign company under Australian law. The Corporations Act 2001 (Cth), which governs companies and financial markets in Australia, is also still in force. The original article concluded that the court's finding would enable the company's winding up under section 583 of the Corporations Act 2001 (Cth), meaning a liquidator could be appointed to collect Ruyi's Australian assets, primarily a loan account held in a local subsidiary. The court was said to have requested the parties to propose formal orders within 14 days, with the final sums to be settled subsequently.

Ruyi, a prominent textile and apparel group, owns significant Australian assets, including sheep farms and the Cubbie Station cotton property. Its operations involved repeatedly purchasing large volumes of Australian cotton, much of it from Cubbie Station, and wool through its local subsidiaries over many years. Ruyi contended that merely buying goods from Australian sellers did not constitute carrying on business within the country, seeking to avoid the jurisdiction for winding-up proceedings. The Federal Court, however, reportedly rejected Ruyi's narrow interpretation. It explicitly stated that buying from Australia, not just selling into it, could amount to carrying on business. The court found that Ruyi's regular and substantial purchases were an integral part of its overall business operations, a finding that alone was deemed sufficient to satisfy the `carrying on business test Australia`.

Beyond the purchasing activities, the court reportedly provided further reasons for its determination that Shandong Ruyi was carrying on business Australia. Evidence showed that a management team, branded the "Ruyi Australia Group," operated within Australia. This team, despite having staff, lacked a formal legal existence and functioned as an informal arm of the parent company. Crucially, the court also found that Ruyi treated one of its Australian subsidiaries as its own direct trading arm. This involved Ruyi directly paying the subsidiary's bills and utilizing the subsidiary's assets as security for debts incurred by other Ruyi companies, all without any discernible benefit to the subsidiary itself. These operational arrangements reportedly reinforced the court's conclusion that Ruyi was running its Australian operations as an integrated part of its own business, thereby justifying the `foreign company winding up Australia`.

This reported ruling sets a significant precedent for foreign companies operating in Australia, particularly concerning the interpretation of `carrying on business` under `Corporations Act s. 583`. The Federal Court's reported decision to wind up the `Cubbie Station owner winding up` underscores that even substantial purchasing activities, coupled with informal operational structures and direct control over subsidiaries, can expose a foreign entity to Australian legal jurisdiction for winding-up proceedings. The court's robust interpretation reportedly broadens the scope of what constitutes 'carrying on business' beyond traditional sales-focused activities. Ruyi had conceded that if the court reached this view, there was no reason it should not be wound up, highlighting the clarity of the court's findings regarding its Australian operations. This case serves as a critical reminder for international businesses with interests in Australia to carefully assess their operational footprint and corporate structures to understand their potential legal exposure.

This Federal Court ruling significantly broadens the interpretation of 'carrying on business' for foreign companies in Australia, extending it beyond sales to include substantial purchasing activities and informal operational structures. Lawyers should advise foreign clients with Australian interests to re-evaluate their corporate structures and activities to mitigate potential exposure to local winding-up proceedings.

Source: Original reporting via Australasian Lawyer