The Companies (Winding Up and Miscellaneous Provisions) (Amendment) Ordinance 2016 (the "Amendment Ordinance") came into effect on 13 February 2017 seeking to revamp and modernize the winding-up regime in Hong Kong, but does it go far enough?
In June 2016 White & Case published an article "Amendments to the Companies (Winding Up and Miscellaneous Provisions) Ordinance – A Missed Opportunity?" summarizing the substantive amendments under the Amendment Ordinance (available here).
In general terms, the Amendment Ordinance increases the protection of creditors by, amongst other things, imposing liabilities and safeguards to reduce the risk of abuse in director-initiated winding-ups, and extending the time within which the Court may claw black floating charges to two years in relation to associates of the company and to 12 months in relation to non-associates. The winding up process will also be streamlined, allowing electronic communications between the liquidator and the Committee of Inspection.
The amendments also introduce a new Form 1A as a prescribed form for a Statutory Demand. We recommend all creditors to adopt the prescribed form to avoid the risk of a Statutory Demand being set aside on the grounds of noncompliance.
These amendments seek to align Hong Kong's winding-up regime with the latest international standards. However, while these amendments are welcome, the Amendment Ordinance still falls short of implementing much-needed structural reforms to truly modernize Hong Kong's insolvency and restructuring regime, including implementing the UNCITRAL Model Law for cross-border insolvency and providing a workable restructuring mechanism, particularly when compared with the recent amendments that Singapore has made to its regime (for a comparison between the Amendment Ordinance and its Singapore counterpart, please refer to our article "Singapore: Asia Pacific's Debt Restructuring Hub?" (available here). In our view then, this remains a missed opportunity.