This is the second in a series of articles highlighting the changes to be brought in by the Companies (Winding Up and Miscellaneous Provisions) (Amendment) Ordinance 2016 (Amendment Ordinance), which was gazetted on 3 June 2016 and will come into effect on a date to be appointed by the Secretary for Financial Services and the Treasury. Our first article looked at the changes aimed at increasing creditor protection. This article looks at the changes aimed at streamlining the winding up process, which mainly relate to changes to the proceedings of Committees of Inspection.
Committees of Inspection
A Committee of Inspection (COI) may be appointed in a court or creditors’ voluntary winding up to represent the creditors and contributories of the company and to supervise and give directions to the liquidator. The Amendment Ordinance introduces a number of changes aimed at simplifying the proceedings of COIs and promoting court-free procedures, thereby reducing the time and costs involved in the winding up process. The changes include the following:-
Appointment of solicitor by liquidator
Currently, in a court winding up, the sanction of the court or COI is required for the liquidator to exercise his power to appoint a solicitor to assist him in the performance of his duties. Under the Amendment Ordinance, that still applies, but as an alternative, the liquidator will be able to exercise such power without court or COI sanction, if he has given at least 7 days’ notice of his intention to exercise such power to the COI members (or to the creditors, if there is no COI).
New Form 1A –Statutory Demand
Another new feature under the Amendment Ordinance is a new prescribed form of statutory demand, which should help streamline procedures by reducing disputes in respect of the validity of statutory demands. The usual ground for a winding up petition is that the company is unable to pay its debts, which is shown by its failure to comply with a statutory demand for payment. Currently, the statutory demand does not have to be in any prescribed form, which often leads to disputes regarding its validity where, for example, it omits certain required information. Under the new rules, the statutory demand will be a prescribed form (Form 1A), which clearly specifies what information must be included.