Hong Kong urgently needs a legal framework for rescuing troubled companies, otherwise more potentially salvageable companies are likely to fail and more jobs will be lost, the Hong Kong Society of Accountants (HKSA) warned yesterday.
Unveiling its response to a Government consultation paper on proposals to introduce provisional supervision as an alternative to the large number of liquidations sparked by the recession, the HKSA said it was essential to provide legal backing for corporate rescues.
'Informal rescues don't have the backing of the legislature or the courts, so it's very difficult to retain some creditors . . . they can always use the threat of liquidation to blackmail other creditors,' John Lees, chairman of the HKSA Insolvency Practitioners Committee, said yesterday.
'What we need is a legislative framework for corporate rescues and provisional supervision gives us that legal framework.
'Unless it's introduced quickly there will be a lot more liquidations in Hong Kong and subsequently a large rise in unemployment.' The Government's proposals, drawn up by the Law Reform Commission (LRC) in 1996, aim to give companies breathing space from creditors while a rescue plan is arranged.
They have been slow to reach the Legislative Council due to concerns about how employees would be treated under provisional supervision.
As it stands, the Protection of Wages on Insolvency Fund (PWIF) - to which all companies in Hong Kong contribute - can only pay out to employees when a company is put into liquidation.