Audacious proposals
PROFESSOR Edward Tyler's plan to overhaul the territory's insolvency laws offer the business and professional community a ripe carrot and big stick.
His proposals for corporate rescue - and punishments for insolvent trading - are a stimulating and rather audacious alternative.
It deserves to stimulate widespread discussion and accelerate the demise of the present defective procedures.
The Law Reform Commission sub-committee trawled the world's Western jurisdictions to pick what it considers to be best practice.
Struggling companies would be offered a lifeline - court protection plus time to put a proposal for a voluntary arrangement to creditors - to put their house in order.
This would be done with minimum recourse to the courts, lawyers, accountants and the small army of other professionals presently needed to lay siege to the nearly impregnable section 166 of the Companies Ordinance.
An independent professional supervisor, who could retain existing directors to ensure the company runs properly, could maintain the company and develop strategies during the crucial initial period of supervision.
This is neither a panacea nor excuse for sick companies, as the independent supervisor will generally have to make a judgment within 30 days.
Under the present system, it generally takes four years for a creditor to receive 20 cents of every dollar owed.
Professor Tyler's suggestion that there be only one class of creditor further simplifies the procedure.
Professor Tyler's big stick is in the form of new penalties for insolvent trading. Directors, including non-executives and senior management, could find themselves liable down to their last cuff-link.
How this will be implemented, and whether it will result in complex, expensive and lengthy court cases, remains to be seen.
