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The Government today (May 28) published the conclusions of the public consultation on the corporate insolvency law improvement exercise and the detailed proposals for introducing a statutory corporate rescue procedure (CRP) and insolvent trading provisions.
A spokesman for the Financial Services and the Treasury Bureau said, "We thank the respondents for making useful comments, and are pleased to note that all legislative proposals set out in the consultation document for improving the corporate insolvency law were supported by the majority of respondents.
"Having taken into account their comments in finalising the legislative proposals, the Government plans to introduce an amendment bill into the Legislative Council (LegCo) in 2015."
The Government conducted a public consultation last year to gauge views on the legislative proposals to improve the corporate insolvency law.
These proposals aim at facilitating more efficient administration of the winding-up process, increasing protection of creditors through streamlining and rationalising the company winding-up procedures, and enhancing regulation of the winding-up process having regard to international experience.
A total of 36 written submissions were received during the consultation period. Also, government representatives attended various seminars and meetings to brief stakeholders on the proposals and listened to their views.
The spokesman noted, "In connection with corporate insolvency, a statutory CRP can provide an option for a company in financial difficulty to turn around and revive its business as much as possible, instead of commencing the liquidation process immediately to wind up the company.
"The introduction of insolvent trading provisions will encourage directors of a company in financial difficulty to act on insolvency earlier, and enhance the protection of its creditors. Therefore, the Government has developed detailed proposals to introduce a statutory CRP as well as insolvent trading provisions."
The major proposals for a statutory CRP and insolvent trading provisions are listed in an annex.
The Government conducted a public consultation on the conceptual framework and some specific issues of the statutory CRP and the insolvent trading provisions in 2009-10. Based on the relevant consultation conclusions, the Government has worked out further details of the proposals which culminated in the package of detailed proposals published today.
Under the detailed CRP proposals, an independent third party, namely the provisional supervisor, may be appointed by a company to take temporary control of the company, consider options for rescuing the company and prepare proposals for a voluntary arrangement for rescuing the company within a specified period for creditors' decision on the way forward for the company.
In order to facilitate the formulation of a rescue plan, there will be a moratorium on legal actions and proceedings against the company when the company is under the CRP.
On protecting the interests of creditors of a company which enters into provisional supervision, the spokesman said, "We propose that a company must obtain the prior written consent of its major secured creditor before commencing the CRP."
He added, "Based on the conclusions of the previous consultation exercise which represent the outcome of discussions with different stakeholders, there will be a phased payment schedule for outstanding employees' entitlements owed by the company at the commencement of the CRP so as to ensure that its employees will be no worse off under the CRP than in the case of an immediate insolvent winding-up of the company."
The Government has been engaging with stakeholder groups to discuss the detailed proposals for the CRP and the insolvent trading provisions, and will continue to engage them when preparing an amendment bill.
"Taking into account the scale of the exercise and the complexity of the issues involved in the CRP initiative, our target is to get ready the draft amendment bill within the current LegCo term," the spokesman said.
The consultation conclusions and the proposals have been uploaded to the website of the Financial Services and the Treasury Bureau (www.fstb.gov.hk).
Ends/Wednesday, May 28, 2014
Issued at HKT 16:30
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