Consultation Paper on the Winding-up Provisions of the Companies Ordinance
21 July 1998
The Law Reform Commission of Hong Kong
Sub-Committee on Insolvency
20/F, Harcourt House
39 Gloucester Road
Wanchai, Hong Kong
Attention: Mr Jeremy Glenn, Secretary
CONSULTATION PAPER ON THE WINDING-UP PROVISIONS OF THE COMPANIES ORDINANCE
We are responding to your letter of 30 April inviting us to submit our comments on the above paper.
Although we have serious reservations on the Commission's earlier consultation paper on Corporate Rescue and Insolvent Trading, which we expressed in our letter to the Commission dated 31/8/95, we are generally supportive of the above paper. We feel that the proposals in the consultation paper should contribute to a more effective winding up regime. In particular, we appreciate the proposals to license insolvency practitioners and to create a consolidated Insolvency Ordinance.
Our comments on the consultation paper are therefore minor.
1. The proposal to shift the burden of proof in respect of
certain offences or
frauds by officers of companies in liquidation to the officer should be very
carefully considered. Given the stresses placed on our legal system by the
changing political environment, one would not want to erode the
protections for the individual that do exist.
2. We are supportive of the proposal to move in the direction
compensation payments by directors instead of imprisonment. Presumably
the burden of proof would be lower in respect of such penalty, and the
success rate in investigation and prosecution higher. If this is the case,
there would appear less need to reduce protections for the individual
officer as per point 1 above.
3. In view of the public controversy over scale fees in the
we wonder why scale fees are being retained, or even extended, in
4. We are supportive of the proposal to reduce the various
preference. Indeed, we wonder whether the paper could go still further
and eliminate the preferences for bank deposits and insurance contracts as
well. Public order or systemic risk implications arise in only a minority of
cases, and we feel that such cases could be dealt with if necessary by
different means rather than by a blanket preference of the kind proposed.
In particular, we feel that any preference given to banks will create moral
hazard, encourage imprudent lending and worsen systemic risk in the long
We hope that the above is helpful, and thank you for consulting us.
Alan LUNG Ka-lun
|Policy Paper - page revised 23-09-2002
Copyright © 1999-2003 Hong Kong Democratic Foundation. All Rights Reserved
Reproduction of this paper is permitted with proper attribution to the Hong Kong Democratic Foundation