Hong Kong Law Reform Commission

Introduction

• Terms of reference
• The consultation process
• Confidentiality
• Abbreviations and other expressions used in this report
• Report in English and Chinese

Terms of reference

2. On 14th September 1990, the then Attorney General and the Chief Justice referred the following topic to the Commission:

“(1) To review the law and practice relating to the insolvency of both individuals and bodies corporate in Hong Kong, and in particular:

(a) the provisions of the Bankruptcy Ordinance, Chapter 6, in their application both to business and non-business debtors; and

(b) the winding-up provisions of the Companies Ordinance, Chapter 32

taking into account existing and proposed legislation in other jurisdictions, in particular the UK Insolvency Act 1986 and Chapter 11 of the US Bankruptcy Code, and to consider what reforms are necessary or desirable.

(2) To submit an early interim report on:

(a) such changes in the Bankruptcy Ordinance as are considered to be required for simplifying bankruptcy procedures, and

(b) any other aspects of insolvency law or practice which the Commission considers should be introduced in advance of the Commission’s final report.”

3. A sub-committee was appointed by the then Attorney General to consider the reference and report to the Commission. The Insolvency Sub-committee is chaired by Professor Edward L. G. Tyler, formerly a Judge of the District Court and Professor and Head of the Department of Professional Legal Education at the University of Hong Kong, and now Professor of Law of the School of Law at the City University of Hong Kong. Professor Tyler was a member of the Law Reform Commission from 4th July 1987 to 11th August 1993. The other members of the Insolvency Sub-committee are:

4. The terms of reference provided that the Commission could make an interim report on such other aspects of insolvency law or practice which the Commission considered should be introduced in advance of the final report on insolvency. The Insolvency Sub-committee’s intention had been to make a single interim report on bankruptcy to the Commission followed by a final report on all other aspects of personal and corporate insolvency. The Commission’s Report on Bankruptcy was published in May 1995.

5. Following completion of its Report on Bankruptcy to the Commission, the Insolvency Sub-committee considered that, as provided for under paragraph 2(b) of the terms of reference, it would be appropriate to make a second interim report to the Commission on the issue of making provision for a procedure to facilitate the rescue of ailing companies and to impose liability on directors and senior management for trading while a company was insolvent. The Insolvency Sub-committee’s report to the Commission formed the basis of the Commission’s Report on Corporate Rescue and Insolvent Trading which was published in October 1996.

The consultation process

6. The winding-up provisions of the Companies Ordinance (Cap. 32), when taken in conjunction with the provisions on receivership and the winding-up of unregistered companies under Part X of the Companies Ordinance, account for about 165 of over 360 sections in the Ordinance. These sections are supported by subsidiary legislation in the form of the Companies (Winding-up) Rules.

7. The Consultation Paper on the Winding-up Provisions of the Companies Ordinance was published by the Insolvency Sub-committee in April 1998. The Insolvency Sub-committee considered that in order for the Consultation Paper to be as comprehensive as possible it would be necessary to seek preliminary submissions from interested bodies on the winding-up provisions before the Consultation Paper was published. The responses received were reflected in the Consultation Paper.

8. The Consultation Paper was sent to about 330 consultees and was also made available free of charge to other interested parties. The Insolvency Sub-committee received about 60 responses to the Consultation Paper, with about 40 of these containing substantive comment.

9. Where a section is not mentioned in the report it is because the Insolvency Sub-committee has no comment to make on it.

Confidentiality

10. This report introduced submissions into the text without quotation for the purposes of making the report “flow” and submissions were only placed in quotations where the quote was substantial or where the body was a Government / representative body where it was appropriate to identify the maker of the submission. Examples of this may be found in the report at Chapter 20 where the Protection of Wages on Insolvency Fund Board, the Commissioner of Inland Revenue and the Secretary for Financial Services addressed issues relating to their own fields of interest.

11. None of those who made submissions to the Consultation Paper requested confidentiality. A list of submissions on the Consultation Paper is annexed.[1] The Commission would like to express its gratitude to all those who made submissions.

Abbreviations and other expressions used in this report

12. For the sake of brevity, references to “he” mean “he or she” unless the context implies otherwise. Abbreviated forms of the following reports and legislation have been used:


“The Commission” : This refers to the Law Reform Commission of Hong Kong.

“Consultation Paper” : This refers to the Consultation Paper of the Winding-up Provisions of the Companies Ordinance published by the Insolvency Sub-committee in April 1998.

“The Cork Report” : The Report of the United Kingdom Committee on Insolvency Law and Practice under the Chairmanship of Sir Kenneth Cork.[2]

“The Insolvency Act” : This refers to the United Kingdom Insolvency Act 1986.

“The Insolvency Rules” : This refers to the United Kingdom Insolvency Rules 1986.

“The court”: References are made throughout the report to the court or the Hong Kong court. All winding-up and bankruptcy cases are heard in the Court of First Instance of the High Court of the Hong Kong Special Administrative Region, which was known as the High Court before July 1997.

“Office-holders”: See Chapter 4. Office-holder is a loosely defined expression which encompasses liquidators, provisional liquidators, receivers, trustees in bankruptcy and provisional supervisors (when introduced).

“Provisional supervision / Provisional supervisor”: These expressions refer to initiatives recommended by the Commission in its Report on Corporate Rescue and Insolvent Trading published in October 1996.

Report in English and Chinese

13. This report is available in both Chinese and English.

[1] See Annex.

[2] 1982. Cmnd 8558.