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The Government today (July 9) published the conclusions drawn from the public consultation on the review of corporate rescue procedure legislative proposals.
A spokesman for the Financial Services and the Treasury Bureau said, "The Government conducted a three-month public consultation from October 29 last year to January 28 this year to gauge views on the review of the legislative proposals to introduce a corporate rescue procedure. We received a total of 59 submissions. The overall proposal to introduce a corporate rescue procedure was generally welcomed."
In response to the global financial crisis in 2008, the Government adopted the recommendation made by the Task Force on Economic Challenges in January 2009 to re-consider the introduction of a corporate rescue procedure to provide an additional tool for helping companies in financial difficulty.
"The aim of introducing the corporate rescue procedure is to provide a statutory 'grace period' - a moratorium on civil legal action -for companies with long-term viability but facing short-term financial difficulty, so that they can restructure their business or debts, or seek capital injection to turn themselves around," the spokesman said.
The majority of submissions indicated support for many of the legislative proposals. A number of respondents stressed the need for Hong Kong to have a corporate rescue procedure. Nevertheless, a few proposals drew disparate views from stakeholder groups.
"One of the main issues of concern is the treatment of employees' outstanding entitlements. We have taken into account public views, in particular the labour sector's views, in formulating a revised proposal which provides for phased payments of outstanding employees' entitlements. Outstanding wages up to $36,000 should be paid within the first month. Wages in lieu of notice and severance payments owed to former employees whose employment contracts were terminated before the commencement of provisional supervision should be paid up to the relevant caps of the Protection of Wages on Insolvency Fund around two and a half months later. Any remaining amount will be paid within 12 months after the start of the voluntary arrangement. The revised approach seems to strike a reasonable balance among different stakeholder groups," the spokesman said.
The initial moratorium period will be set at 45 working days. All registered certified public accountants and practising solicitors will be eligible to take up appointment as a provisional supervisor. The provisional supervisors will be personally liable for specified debts and liabilities under certain conditions.
"To encourage distressed companies to act on insolvency earlier, and with majority support from the respondents, we propose to provide for insolvent trading provisions, which would empower a liquidator to apply to the court to make a director or shadow director of a company, who knew or ought reasonably to have known that the company was insolvent or there was no reasonable prospect that the company could avoid becoming insolvent, personally liable for the debts of a company which traded while insolvent," the spokesman said.
Other legislative proposals put forward for public consultation included initiation of provisional supervision, exemption from moratorium and protection of secured creditors' rights, etc. Having considered the feedback received, the Government will include them in the draft legislation, subject to certain modifications.
The Government will proceed to prepare the draft legislation.
A full copy of the consultation conclusions and feedback received is available at www.fstb.gov.hk/fsb/ppr/consult/review_crplp.htm.
Ends/Friday, July 9, 2010
Issued at HKT 15:45
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