Winding-up guidelines plug gap
Notes for accountants bring SAR more into line with other business centres
New guidelines issued yesterday to accountants acting as liquidators plug a regulatory gap and brings Hong Kong more into line with international practice.
The Insolvency Guidance Notes from the Hong Kong Institute of Certified Public Accountants are the first for accountants appointed to wind up companies and aim to outline best practice under the Companies Ordinance.
'Insolvency practice has been largely an unregulated area in Hong Kong, unlike in most other major business centres,' said Paul Chan Mo-po, vice-president of the institute. 'Introducing best practice guidance represents a first step by the institute towards a more regulated approach.'
Hong Kong has no detailed regulation on company liquidations, partly due to the relatively low number of insolvencies before the Asian financial crisis in 1997.
The guidelines outline the scope and role of the liquidator's investigation into insolvent companies, and reporting procedures on the conduct of the company directors to the Official Receiver.
Mr Chan said more still needed to be done to enhance the regulation on liquidators.
'For the longer term, it is better for the government to consider introducing a licensing system for liquidators so as to ensure those carrying out the company winding up are qualified for the job,' he said.
Alan Tang, chairman of the institute's insolvency practices committee, said a proper set of regulations on liquidation was a key factor for a stable market.
'The orderly administration of companies in financial difficulties and the winding of those that can no longer be saved is critical to the efficient operation of the market,' Mr Tang said. 'But people sometimes overlook the fact that it also is part of the rule of commercial law in Hong Kong.'