Proposals for Insolvent Trading Laws in Hong Kong : A Comparative Analysis

After years of deliberation, Hong Kong is close to introducing laws to impose personal liability on directors of a company who are responsible for insolvent trading. The proposed insolvent trading laws will be accompanied by provisions for a statutory corporate rescue procedure called provisional supervision. This approach encourages directors to act early in dealing with a company’s financial difficulties, by placing the company in provisional supervision with a view to implementing a restructuring with creditors. If directors allow the company when it is insolvent to continue to trade and incur debts to the detriment of creditors, they can potentially be liable to compensate the company for its losses resulting from insolvent trading. The proposed Hong Kong provisions on insolvent trading are modelled in part on the Australian insolvent trading and English wrongful trading provisions. This article analyses the proposed provisions in Hong Kong from a comparative perspective with reference to the Australian and English law