Bankruptcy

HK boasts low liquidation rate as new firms survive

PUBLISHED : Friday, 25 April, 1997, 12:00am
UPDATED : Friday, 25 April, 1997, 12:00am

The level of compulsory company liquidations in Hong Kong remains at a low level compared to the number of new businesses being created, the latest figures from the Official Receivers Office reveal.


There were 557 new liquidations in the 1996-97 financial year - representing less than 1 per cent of the 58,010 businesses formed during that period.


When compared to the total number of businesses in Hong Kong - about 490,000 - that figure is about 0.1 per cent.


The number of bankruptcies dealt with in court as insolvency cases increased from 1,013 in 1995-96 to 1,119 in 1996-97.


Official receiver Robin Hearder said he believed this was low in comparison with other countries, taking into consideration the huge volume of economic activity in Hong Kong.


In Singapore, for example, there were 1,252 bankruptcies last year, while in Britain there were more than 28,000 in 1994-95.


Mr Hearder said the main reasons for failure could be put down to declines in business, cash-flow problems, poor management and an excessive use of personal credit facilities.


The figures show little change in the type of companies that get into trouble - the garment industry, importers and exporters, restaurants and canteens, electrical component manufacturing, construction and engineering, and land and property developers.


The bulk of petitions came from the Legal Aid department, trade creditors and banks and financial institutions.


A total of 64 directors or former directors were convicted of insolvency offences, with a total of $212,595 in fines against them.


There were 27 orders for disqualification of company directors, prohibiting them from acting in that capacity for up to five years. Of the 24 arrest warrants issued against unco-operative persons, six were exercised.