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The Government proposes to consult the Panel of Financial Affairs of the Legislative Council on the introduction of a statutory corporate rescue procedure and insolvent trading provisions to the Legislative Council in the first quarter of 2021.
The Companies (Corporate Rescue) Bill was originally introduced in 2000, but was never enacted and has since lapsed.
The new corporate rescue procedure will be different from the Chapter 11 procedure in the United States, which is a debtor-in-possession model and which allows the existing management to continue managing the insolvent company (see press release (Chinese only) on the statement made by the Secretary for Financial Services and the Treasury Bureau at the meeting of the Panel of Financial Affairs on 2 November 2020). Instead, the new corporate rescue procedure will require independent third party professionals who must be either certified public accountants or solicitors with a practicing certificate in Hong Kong to take temporary control of the company and prepare proposals for a “voluntary arrangement”. The new corporate rescue procedures aim to benefit companies who have long term growth potential but are facing short term financial difficulties due to market conditions.
The Administration also made reference to the various public consultations over the years and meetings of the Panel of Financial Affairs on this topic up until January 2020.
For details of the proposed statutory corporate rescue procedure and insolvent trading provisions, please refer to the 2 November 2020 FA Panel Background Brief.
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