Hong Kong to adopt bankruptcy system

The system would give companies a window to restructure their debt.

Hong Kong plans to introduce its version of the US-style Chapter 11 bankruptcy provisions, as the city’s worst economic predicament in decades threatens the viability of many companies, according to a report by Reuters.

Hong Kong does not have a formal corporate rescue framework, unlike most other major financial centres including fierce rival Singapore, after previous attempts to introduce one has been met with resistance from lawmakers and labor representatives, worried that plans did not offer enough protection for workers.

The chapter 11 bankruptcy system would give struggling companies a window to restructure their debt while being protected from the threat of legal action by their creditors.

Named after the US bankruptcy code 1, Chapter 11 is a bankruptcy system that allows a reorganisation of a debtor's business affairs, debts, and assets.

James Lau, Hong Kong’s secretary for financial services and the treasury, intends to propose a bill setting out the new arrangements in early 2021.

Read the full report here.

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