Struggling Hong Kong companies unlikely to get a break

Business liquidation in Hong Kong is still in the Stone Age. A perfectly viable company running into temporary liquidity problems may be exposed if there is just one hostile creditor suing for liquidation. Valuable assets then lose significant value as they are put up for fire sales.

Sadly, anti-government protests and the coronavirus outbreak have brought many companies to their knees. Personal bankruptcies and business liquidation are bound to spike. It’s high time to legislate corporate rescue laws to help otherwise viable businesses to restructure debt and stay afloat or to find a white knight.

The Financial Services and the Treasury Bureau is drafting such a law and consulting the business sector. Officials hope to table a draft law by the new session of the Legislative Council in October. They are on the right track; in fact, it’s long overdue.

But I am not optimistic they will get it through the new Legco. My guess is, even if there is no landslide victory in September’s Legco elections for anti-government and opposition candidates, as in November’s district council polls, they will still make significant gains.

Most of them will be inclined to vote against such a corporate rescue law, whether or not they understand the issues involved. Unionists have long argued that such a law will put workers who are owed wages at a disadvantage.