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Restructuring and insolvency law in Hong Kong refers to the legal processes and frameworks that come into play when individuals or companies are unable to pay their debts as they fall due. In such circumstances, Hong Kong law offers several mechanisms to either allow a business or individual to reorganise their debts and operations (restructuring) or to wind up their affairs in an orderly manner (insolvency). The aim of these laws is to balance the interests of creditors, debtors, employees, and other stakeholders, while providing predictable and effective solutions for financial distress.
There are various scenarios where seeking professional legal advice is crucial in matters of restructuring and insolvency. Some common situations include:
A lawyer can explain your rights and obligations, guide you through the complex legal processes, and help you minimise risks or losses.
Hong Kong’s framework for restructuring and insolvency is primarily governed by the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), the Bankruptcy Ordinance (Cap. 6) for individuals, and relevant case law. Key features include:
Restructuring generally involves reorganising a company’s debts and operations to allow it to continue trading, while insolvency is the legal process when a person or company cannot pay its debts and may involve bankruptcy or liquidation.
A company may be wound up if it is unable to pay its debts, if members decide to wind it up voluntarily, or on other statutory grounds such as if it is just and equitable to do so.
During liquidation, a liquidator takes control of the company’s assets, pays off creditors as far as possible, and distributes any surplus to shareholders before dissolving the company.
An individual can be made bankrupt if they owe at least HKD 10,000 and are unable to pay. The Official Receiver or a trustee manages the bankrupt’s estate and distributes assets to creditors.
Yes, Hong Kong courts have powers to recognise and assist foreign insolvency proceedings under certain conditions, especially where there is a substantial connection to Hong Kong.
A scheme of arrangement is a court-supervised process in which a company and its creditors or shareholders agree to restructure the company’s debts or ownership, subject to approval by requisite majorities and the court.
Generally, directors are not personally liable, but may become so if they have engaged in wrongful trading, fraudulent acts, or breached statutory duties.
Hong Kong law gives certain employee-related claims, like unpaid wages and severance pay, preferential status in a liquidation or bankruptcy.
You should seek legal advice immediately to assess your options, respond appropriately in court, and try to negotiate a settlement or restructure debts if possible.
Once discharged from bankruptcy, you are generally free to start or manage a new company, unless otherwise restricted by a court order.
The following resources and organisations can provide help and further information on restructuring and insolvency in Hong Kong:
If you are facing or anticipating financial distress or insolvency, it is important to act promptly. Consider gathering all your relevant financial documents, making notes of your creditors and outstanding debts, and seeking professional advice. Contact a qualified lawyer or insolvency practitioner with experience in Hong Kong restructuring and insolvency matters. Early legal guidance can help you understand your options, safeguard your rights, and potentially avoid more serious consequences down the line.
Be proactive, stay informed, and do not hesitate to reach out to professionals or relevant authorities for support.
