[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN HONG KONG] 56
urgency e.g. for preservation and investigation of assets and transactions, provisional liquidators may be appointed with restrictive powers, before winding-up orders are made. Trustees-in-bankruptcy and liquidators have a wide range of powers including selling, executing documents, claiming and receive money, paying bills, employing solicitors and all other matters as may be necessary for winding up the affairs of the debtor and distributing its assets in the priorities under the statutory framework. Meanwhile, there are duties on the part of the debtor and/or its directors to attend interviews, to answer questions, to provide assistance in realizing properties, to provide statements of affairs and so on. If the debtor and/or its directors fail to do so, the trustees-in- bankruptcy or liquidators may apply to the Court for public examination against the debtor and/or its directors. In addition, in bankruptcy context, failure to assist may result in a non- commencement order, which postpones the commencement date of the period of bankruptcy such that the bankruptcy order will not automatically discharge after 4 years from the commencement date. If undervalue transactions, preferential payments, fraudulent transfers or other causes of actions are involved, trustees-in-bankruptcy and liquidators also have the power to commence appropriate legal actions against the parties concerned in order to claw back assets into the estate. (5) Employees Hong Kong safeguards labour rights by providing timely alleviations. Once a winding-up or bankruptcy petition is presented in the Court against the individual employer (whether a company or an individual), the Protection of Wages on Insolvency Fund may make ex gratia
payments to the affected employees whom the employer is still indebted to arrears of wages, wages in lieu of notice, accrued holiday remuneration and severance payment under the statutory framework. Upon liquidation of the employer, employees are entitled to payment out of the assets of the employer in priority to most other creditors in respect of arrears of wages, wages in lieu of notice, accrued holiday remuneration and severance payment, subject to statutory limits. (6) Rehabilitative Options (A) Options As an alternative to insolvency, an individual debtor may apply for an Individual Voluntary Arrangement (IVA) which allows the debtor to make a repayment proposal to the Court and the creditors. The proposal, once approved by a majority in excess of 75% in value of the creditors present in person or by proxy and voting on the resolution, will be binding on every creditor who had notice of and was entitled to vote at the meeting whether or not he was present or represented. A company can also enter into a scheme of arrangement which allows repayment proposals to be accepted by the creditors, which may include compromises e.g. instalments, haircuts and deferrals, with a view that liquidation can be avoided. Procedurally, a scheme of arrangement will become binding on all creditors upon the Court’s leave to convene a creditor’s meeting, the approval of the scheme by at least 75% of creditors (by value) and a majority in number (more than 50%) in a validly held creditor’s meeting, and the Court’s sanction of the scheme. Normally, scheme administrators will be appointed to implement the scheme. In sanctioning a scheme of arrangement, the Hong Kong Court would consider various factors
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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