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Views on Companies (Corporate Rescue) Bill

30 July 2001

Clerk to Bills Committee on Companies (Corporate Rescue) Bill
Legislative Council Secretariat
3^rd Floor, Citibank Tower
3 Garden Road
Central
Hong Kong

Dear Sir/Madam,

We are responding to your invitation for comments on the above bill.

We are against the proposals set out in the bill. We expressed our reasons for our opposition to the provisional supervision concept in our original submission, dated 31^st August 1995 (http://www.hkdf.org/papers/950831insolven.htm), a copy of which is attached.

In summary, while we can see that the bill would benefit insolvency practitioners, we believe that it has little other merit. The negative effects of the proposal – in undermining the rights of creditors and obstructing the "creative destruction" of weak firms - outweigh the benefits, if any, that the proposal might bring to the stakeholders of the individual firms concerned. The analysis of "Economic Implications" in the related Legislative Council Brief is too narrow. The proposed provisional supervision process appears complex and would be difficult to render transparent to the parties involved. It would therefore provide opportunity for the unscrupulous to manipulate or take advantage of the situation. The assertion that the provisional liquidator "must be independent, acting with integrity" (page 3 of the brief) is otherworldly. At best, the insolvency process requires horse trading, application of pressure, even bullying, to get things done. A franker acknowledgement of the human realities of the process would do the brief more credit.

For further details we refer you to earlier submission.

Yours sincerely,

Alan LUNG Ka-lun
Chairman