Welcome, but poorly drafted

Author: | Published: 1 Dec 2009

Rachel Evans
Asia editor

Hong Kong's consultation paper on a rescue regime for distressed companies seems to be poorly thought out. The paper has not resolved several problematic proposals from 2001's bill – particularly regarding the treatment of employees.

Lawyers are relieved that the government has shelved 2001's plan to extend liability for insolvent trading from directors to senior management. The new proposals also remove liability for trading when there was a "suspicion" that the company was insolvent.

But some feel that despite more than 10 years of consideration the process has not moved much beyond the 2001 bill. Key issues, such as the preferential treatment of employees, remain. "Employees are the big problem with these proposals. They were the problem previously and they remain so today," says Neil McDonald of Lovells.

Bruce Cooper of Freshfields Bruckhaus Deringer argues: "These proposals are not fantastically new and improved over the 2001 proposals...