Vol 14 (2017) - Issue 5

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Corporate Rescue Reform: Lessons Hong Kong Can Learn from Singapore?

Introduction
It is beyond dispute that a viable business getting into financial distress is worth more if it is preserved as a going concern than if its parts are sold off piecemeal. Thus all stakeholders of this business will benefit if the law lays down procedures on how businesses can be preserved as a going concern and provides a chance of corporate rescue and debt restructuring. This view is shared by the Law Reform Commission of Hong Kong: "It [corporate rescue and restructuring] benefits the company's shareholders, as if the company survives, their share holdings might become valuable, whereas if a company is insolvent and wound up they get nothing. It benefits the ordinary creditors of the company if they obtain more from a company reorganisation than from a dividend in a winding up, with the added benefit that they would keep a customer. It has become increasingly clear that secured creditors, usually banks, must look beyond the notion that being secured means that they are not affected by the winding up of a client company. Employment that would otherwise disappear would be preserved, at least to some extent. All of this has implications for Government both in revenue and social terms."