Hong Kong companies have no safety net in fight for survival

The region does not have recourse to any corporate rescue procedure in times of difficulties.

Hong Kong is being threatened by a “Tsunami-like” cataclysm, the city’s finance chief has warned, as the new coronavirus devastates businesses already hobbled by months of anti-government protests. The financial hub’s lack of a bankruptcy process will only exacerbate the pain.

Unlike in the US, Australia and rival Singapore, businesses in Hong Kong don’t have recourse to any corporate rescue procedure when in difficulties. The lack of a proper legal framework for seeking bankruptcy protection, which has been deliberated on for a quarter century, means companies are forced into liquidation, according to Johnson Kong, the president of the Hong Kong Institute of Certified Public Accountants.

Formal procedures give cash-strapped companies the opportunity to turn around, instead of immediately winding up and leaving employees and creditors unpaid.

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