**************************************************

Reviewing the work of the Official Receiver's Office in 1998/99, the Official Receiver, Mr. Tom Berry, said today (Thursday) that the total number of new court insolvencies had increased from 1,102 in 1997/98 to 1,942 in 1998/99.

He said that the increase in the total number of insolvency cases in 1998/99 apparently reflected the economic downturn as a result of the economic situation in Asia and the increased trend for debtors to resort to their own bankruptcy to clear their debts.

There were 763 new compulsory company liquidations in 1998/99, representing 2.4 per cent of the total number of new companies incorporated during the year (31,291). An increase of 66 per cent over the corresponding figure of 459 in 1997/98.

Mr Berry said the number of new compulsory company liquidations was only around 0.16 per cent of the total number of companies (480,148). Major causes of failure were a general decline in business, cash flow problems and high operating costs.

He said that 1998/99 was the third year in the past decade in which the number of new bankruptcies exceeded the number of new compulsory company liquidations. While the total number of new bankruptcies increased from 643 in 1997/98 to 1,179 in 1998/99, new bankruptcies resulting from self-petitions increased substantially from 37 in 1997/98 to 569 in 1998/99. The major causes of failure were excessive use of credit facilities, inability to meet liabilities arising from personal guarantees and overspending.

Mr Berry noted that many of the self petitioned bankruptcies cases would be more suitable for the new Individual Voluntary Arrangement procedures, but creditors had so far been reluctant to accept proposals by debtors under this provision.

The businesses mainly affected by compulsory company liquidations and bankruptcies in 1998/99 included garment and knitting manufacturing, restaurants and canteens, land/property development and investment, importers and exporters, construction and engineering, as well as electrical and electronic manufacturing.

In bankruptcy, petitions were filed by debtors themselves (55 per cent), banks and financial institutions (19 per cent), trade creditors (13 per cent), the Director of Legal Aid (8 per cent), landlords (1 per cent) and others (4 per cent).

In compulsory winding-up, petitions were filed by the Director of Legal Aid (45 per cent), trade creditors (28 per cent), banks and financial institutions (11 per cent), landlords (4 per cent), shareholders (4 per cent), the companies themselves (1 per cent) and others (7 per cent).

On insolvency prosecutions, there were 162 summonses as against 123 in 1997/98 issued against bankrupts and directors of compulsory wound-up companies for failure to submit statements of affairs to the Official Receiver, failure to keep proper books and records and misconduct.

A total of 122 bankrupts or directors as against 73 in 1997/98 were convicted of insolvency offences. The total amount of fines imposed by the court was $106,024 as against $210,687 in 1997/98 despite the increase of conviction. Twenty-two orders for disqualification of company directors were made by the court in 1998/99 as against 44 in 1997/98. The directors concerned were prohibited from acting as directors for periods varying from one to four years.

Total dividends declared by the Official Receiver during 1998/99 (excluding BCCHK) amounted to $54.69 million in 181 insolvencies, as against $58.43 million in 230 insolvencies in 1997/98.

One hundred per cent preferential payments or ordinary dividends were declared in 55 insolvencies as against 81 cases in 1997/98 because there were less assets in the cases handled by the Official Receiver.

End/Thursday, April 22, 1999

NNNN