Hong Kong resurrects Chapter 11-style corporate rescue bill after a 24-year hiatus as Singapore powers ahead with reforms
- The government plans to finalise its proposal and potentially table a bill during the legislative session beginning in October, official says
- The plan, first mooted in 1996 during its British colonial days, was opposed in past attempts by some lawmakers and unionists
Hong Kong plans to introduce Chapter 11-style provisions in its corporate rescue laws to shield debt-stricken companies from hostile acts while they reorganise their finances, revisiting a holdover from colonial days that failed to pass in various attempts through major financial crises.
The government intends to hold a new round of consultation in the coming months, before possibly putting a draft bill to the Legislative Council after the session in October, the Financial Services and the Treasury Bureau said in an email reply to South China Morning Post. A statutory corporate rescue procedure and insolvent trading provisions are being drafted, it added.
A key part of the proposal may include giving debtors a six-month moratorium from hostile acts, such as winding-up or liquidation proceedings, while they work on rehabilitation plans or find white knights, according to people involved in the discussions.
The move underlines the government’s efforts to prevent a wider implosion in corporate failures after gross domestic product economy shrank last year for the first time since the global financial crisis. Anti-government protests and the coronavirus outbreak have now brought many pillars of the economy to their knees.
“I have already urged the government to speed up the process of introducing a proper corporate rescue legislation, as that is important for Hong Kong as an international financial centre,” said Johnson Kong, president of the Hong Kong Institute of Certified Public Accountants. The law is “very urgently needed” as the current financial crisis is threatening to push thousands of companies into liquidation, he added.