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The legislative proposals on the improvement of the corporate insolvency law are highly relevant to creditors (including company employees), company members, directors and insolvency practitioners, and members of the public are welcome to submit their views.
"Hong Kong is an international commercial city. A friendly business environment and a robust legal system are crucial to maintaining our competitiveness. Many international reports have included the efficiency of corporate winding-up regimes as one of their assessment criteria in evaluating the ease of doing business in different jurisdictions. Therefore, we have to improve the corporate insolvency law of Hong Kong to ensure that our corporate winding-up regime can keep up with the latest developments. This will also help to reinforce our position as an international financial centre," said a spokesman for the Financial Services and the Treasury Bureau.
There are 46 legislative proposals in the consultation document. These proposals seek to streamline procedures, as well as enhance regulation of the winding-up process, in order to increase creditors' protection.
"Corporate insolvency law can preserve the remaining assets of the insolvent company as far as possible, and distribute the assets amongst the creditors in a fair and orderly manner," added the spokesman.
A number of legislative proposals will enhance the protection of creditors. This includes a proposal by the Government to introduce a new provision on "transactions at an undervalue" so as to prevent the company from dissipating its assets prior to its winding-up, thus causing losses to the creditors due to a reduced pool of realisable assets.
According to the proposal, if a company offers a gift to a party or enters into a transaction for a consideration which is significantly less than the market value, the court may set aside that transaction. The proposed relation back period is five years. This proposal will also prevent the wound-up company from making a comeback through an undervalued acquisition of the company's assets by another company.
Since employees are also creditors of the company being wound up, the present law already provides that the outstanding wages of the employees should be paid in priority to all other debts from the realised assets. Under general circumstances, these employees will apply for the ex gratia payment from the Protection of Wages on Insolvency Fund as an advance payment. Hence, even if the insolvent company does not have any realised asset, employees' interests are already protected by the fund.
The Government's legislative proposals will not change this important principle. The law still gives priority to protecting employees' interests as far as possible.
Some of the legislative proposals will streamline the current company winding-up process. At present, the bills of costs or charges of the agents employed by the liquidator must be delivered up for taxation by the court.
To cut unnecessary cost, the Government proposes that taxation will be required only if the liquidator and the committee of inspection (COI) cannot reach an agreement on the proposed fees. In other words, for most cases which are not controversial, taxation by the court will not be required.
Separately, the Government also proposes to streamline the operation of the COI. For example, the COI will be allowed to function through written resolutions sent by post or via electronic means.
The above proposals can save a lot of time and expenses, which will eventually benefit the creditors.
The consultation document can be downloaded from the websites of the Financial Services and the Treasury Bureau and the Official Receiver's Office.
Ends/Friday, July 12, 2013
Issued at HKT 17:10
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