On 3 June 2016, the Hong Kong Government gazetted the Companies (Winding Up and Miscellaneous Provisions) (Amendment) Ordinance 2016 (“Amendment Ordinance”). The date of commencement of the Amendment Ordinance will be appointed by the Secretary for Financial Services and the Treasury by notice published in the Gazette.

Background

The Amendment Ordinance seeks to improve and modernise Hong Kong’s corporate winding up regime. It amends the existing winding up provisions, which remained in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32) (“CWUMPO”) and its subsidiary legislation following the new Companies Ordinance (Cap.622) in 2014. The Amendment Ordinance was drafted with the aims to:

  • Increase the protection of creditors;
  • Streamline the winding up process; and
  • Further enhance the integrity of the winding up process.

Increase the protection of creditors

Under the Amendment Ordinance, the key amendments to the CWUMPO to increase creditors protection are:

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Streamline the winding up process

The Amendment Ordinance introduces provisions which improve the proceedings of the Committee of Inspection (“COI”), promote Court-free processes, and simplify other related procedures. The key amendments to the CWUMPO and the Companies (Winding-Up) Rules (Cap.32H) (“CWUR”) are:

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Further enhance the integrity of the winding up process

In relation to liquidators and provisional liquidators, the Amendment Ordinance also introduces certain regulatory measures to further enhance the integrity of the winding up process. The key amendments to the CWUMPO and the CWUP are:

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A Missed Opportunity?

The amendments to the CWUMPO by the Amendment Ordinance are welcome, in particular the amendments to the Unfair Preference provisions and introduction of Transactions at an Undervalue.

However, the Amendment Ordinance provides mainly ‘band aid’ solutions rather than the major surgery required to truly modernise the financial restructuring and insolvency regime in Hong Kong, as a key global financial centre, to ensure that it is better prepared to meet challenges in the region. In particular it fails to:

  • Implement the UNCITRAL Model Law for cross-border insolvency;
  • Implement a statutory regime to facilitate corporate rescue and restructuring; or
  • Provide for insolvent trading (even without criminal sanction).

The amendments in the Amendment Ordinance are unlikely to deliver much material improvement to creditor recoveries. Considering that the Amendment Ordinance is the first significant update in this area of law in many years after several stalled attempts, and that it may be a long time until another chance comes by, the Amendment Ordinance seems to be a missed opportunity.