The Law Reform Commission of Hong Kong in 1996 published a report on corporate rescue and insolvent trading (“LRC Report”). It recommended the introduction of a new corporate rescue procedure known as provisional supervision with the aim of rescuing viable companies as an alternative to winding-up. The LRC report also proposed the new concept of insolvent trading. Under the proposal, a liquidator could take proceedings against those directors of a company who have allowed the company to trade while it was insolvent.
Following a series of consultation exercises, in April 2018, the Financial Services and the Treasury Bureau (“FSTB”) further released a consultation paper setting out its latest proposals on a number of specific issues on the introduction of a statutory corporate rescue procedure and insolvent trading provisions (“Consultation Paper”). The FSTB invited views.
The specific issues mentioned in the Consultation Paper include:
- prior written consent of major secured creditor
- notification requirements on commencement of provisional supervision
- moratorium during provisional supervision
- investigation of company’s affairs during provisional supervision
- personal and statutory liabilities of provisional supervisor
- pre-commencement outstanding entitlement of employees
- effect of approval of voluntary arrangement on company in winding-up proceedings taken before commencement of provisional supervision
- safeguard measures for corporate rescue procedure.
The Council has reviewed the Consultation Paper with the assistance of the Insolvency Law Committee and provided comments on moratorium period, investigation powers of a provisional supervisor and personal liability of a provisional supervisor. In addition, the Law Society of Hong Kong has expressed its views that it is very keen to see progress in the introduction of a statutory corporate rescue procedure and insolvent trading provisions into Hong Kong’s insolvency law.
The Law Society’s detailed comments are available at http://www.hklawsoc.org.hk/pub_e/news/submissions/20180529a.pdf