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Abstract:
This article examines the relationships within East Asia between economic development, governance, property rights, provisions for the deployment of collateral and the creation of secured financial transactions, and creditor rights and their relationship with insolvency. No sophisticated market economy or market-based financial system can exist without these prerequisites, regardless of indigenous or acquired national characteristics or the form manifested by that system. However, in no national case in East Asia can the legal, regulatory, or policy background be described as either complete or fully integrated.

East Asia, property rights, collateral, secured transactions, creditor rights, insolvency

Abstract:
Both the People’s Republic of China and the Socialist Republic of Vietnam are making the transition from a centrally planned economy to a market-based economy. An effective bankruptcy law is an integral part of the institutional framework necessary for this transition. China enacted the Law of the People’s Republic of China on Enterprise Bankruptcy on December 2, 1986, and it came into operation on October 1, 1988. On April 9, 1991, the PRC Civil Procedure Law was approved, with Chapter XIX applying to the bankruptcy of non-SOE enterprises with legal person status. The Vietnam Law on Bankruptcy was enacted on December 30, 1993, and took effect on July 1, 1994. These laws did not live up to early expectations and both China and Vietnam proposed new insolvency laws The present article provides an update on the insolvency reform processes in China and Vietnam since mid-2002 and discusses six main areas: the insolvency framework, the scope of the bankruptcy laws, bankruptcy administration, corporate rehabilitation, priorities in distribution and the protection of employees’ interests, and cross-border insolvency issues.

Abstract:
This roundtable discussion spotlights Japan, the Hong Kong SAR and the People’s Republic of China. During the course of this roundtable, the participants provide a summary of each jurisdiction’s insolvency regime and highlight some of the unique reorganization and debt restructuring problems and issues that are particular to that jurisdiction. The participants also highlight which structures, strategies and tools have worked well in these jurisdictions over the past five years and which have not. Finally, the panelists offer their views on trends, prospects for the future and suggest approaches that may accelerate the reduction of non-performing loans and assist with corporate debt restructurings in these jurisdictions.

Abstract:
In 1986, the People’s Republic of China enacted its first national bankruptcy law, the Law of the People’s Republic of China on Enterprise Bankruptcy, as part of an emerging legal framework for the country’s transition from a planned economy to a market economy. At the time of its enactment the bankruptcy law was considered a significant political and economic breakthrough that was necessary to apply some market pressure on China’s State-Owned Enterprises (“SOEs”) to force them to become more efficient. However, the rapid development of economic reforms in China soon exposed serious limitations in the bankruptcy law: The law does not apply to Chinese economic organizations in general, the provisions guaranteeing government involvement and control conflict with introduction of market-centered rules, relatively few bankruptcy cases have been brought under the 1986 law, and the law does not cover many of the issues and problems that arise under bankruptcy. China has worked for many years to try and improve its bankruptcy law but has not yet succeeded in enacting a new law. Against this backdrop, the bankruptcy practice in the Shenzhen Special Economic Zone offers an interesting and informative comparison and perhaps some lessons for China in reforming its national bankruptcy law. To gain a clearer understanding of Shenzhen insolvency law, the Faculty of Law at the University of Hong Kong and the Department of Economic Law at the China University of Politics and Law in Beijing conducted interviews of members of the Shenzhen judicial, legal, and political branches who are familiar with bankruptcy law and practice in Shenzhen. These interviews were conducted from February 16 to 18, 2000, by team members from both universities as part of a joint research project.

Abstract:
The author, an American academic in Hong Kong, argues that Hong Kong should reform its transnational insolvency law before 1977. He first examines the options available under Hong Kong law for protecting the assets of a foreign debtor and for obtaining cross-border assistance from Hong Kong courts, including non-insolvency options, the winding up of foreign companies, and the bankruptcy of individuals. He also summarizes the position in England, the United States, and China regarding the granting of recognition and assistance to Hong Kong insolvencies. He then discusses economic, political, and legal developments that will affect the post-1997 evolution of Hong Kong transnational insolvency law and the treatment of Hong Kong insolvencies by foreign courts. The author critiques recent law reform proposals, highlights weaknesses in the existing legislative and case law framework, and proposes many amendments to Hong Kong transnational insolvency law. He also calls on Hong Kong and China to enter into a bilateral cross-border insolvency agreement and to take steps to maintain confidence in the administration and adjudication of Hong Kong insolvencies after 1997.

Abstract:
Chapter 11 of the Bankruptcy Code sets forth the procedures for the confirmation of a reorganization plan. Section 1129(a) includes the criteria for the most frequently used method of confirmation- that of settlement by the debtor, creditors, and equity holders. Section 1129(b) sets forth an alternative method of confirmation called the “cramdown,” which is often written about and discussed but which has occurred in relatively few cases since the Code has been in effect. The cramdown option permits the confirmation of a plan notwithstanding the failure of one or more classes of impaired claims or interests to accept the plan under section 1129(a)(8). The cramdown is one of the new provisions included in the Code to facilitate the confirmation of a plan in the face of opposition by one or more classes. Perhaps more importantly, most commentators view the inclusion of the cramdown provisions as favoring settlement, since the complexity and risks involved in a cramdown should encourage compromise and bargaining among the debtor, creditors, and equity holders. This article discusses the cramdown on secured creditors under sections 1129(b)(1) and (2)(A). Since an understanding of the cramdown on secured creditors is at times inextricably linked to an understanding of the cramdown on unsecured creditors and equity holders, there will be reference to cases that involve the cramdown on unsecured creditors.

Abstract:
One of the glaring omissions in private international law has been the failure of nations to reach accord about transnational insolvency. Historically, there has been little formal cooperation among bankruptcy courts worldwide. Most have long responded to the problem of what effect to give to foreign bankruptcies by protecting domestic interests and local creditors, and at times even discriminating against foreign creditors. This nationalistic approach to bankruptcy laws has often resulted in full liquidation proceedings in every country in which the assets of a debtor are located. It has also caused duplication of expenses and litigation, inequitable distributions to creditors worldwide, and instability in the climate for international trade. This article discusses U.S. law - and the inconsistent application of that law - regarding the recognition of foreign bankruptcy proceedings.

Abstract:
Over the past two centuries, the courts of the United States have wrestled with the questions of what effect to give to foreign bankruptcies and whether or not to recognize the claims of foreign representatives. The reforms of the Bankruptcy Reform Act of 1978 provided a statutory framework to guide the courts in this difficult area involving transnational insolvency. This article examines the development in the major cases and scholarly works addressing the recognition of foreign bankruptcies and foreign representatives prior to the Bankruptcy Reform Act of 1978. Many of the principles developed over the past two centuries have been incorporated into the current U.S. statutory regime. These principles, as well as the cases in which they were originally espoused, are discussed in many of the recent judicial opinions resolving transnational insolvency issues.

Abstract:
Many Asian countries, including the People’s Republic of China, have been developing at an accelerated pace and are playing an expanded role in world trade. Hong Kong’s role as a world financial market benefits from this growth, for Hong Kong is a major conduit by which Chinese enterprises, and Hong Kong enterprises investing in China, raise capital from local, Asian-Pacific, and other interests. Unprecedented amounts of foreign capital are flowing into the Hong Kong stock market as foreign investors seek to benefit from the economic expansion of both Hong Kong and China. However, hovering in the background of Hong Kong’s prosperity is the planned resumption of Chinese sovereignty over Hong Kong in 1997. If foreign investors lose confidence in Hong Kong or if economic crises develop in China, foreign funds will very likely flow out of Hong Kong as quickly as they came in, perhaps causing a crash in the Hong Kong stock market and property markets and, in turn, the insolvency of many Hong Kong companies and individuals. This article explores the theoretical and practical aspects of transnational Hong Kong insolvency law, both for foreign and domestic representatives.

Abstract:
Unlike most other jurisdictions in Asia, Hong Kong began its corporate insolvency law reform efforts prior to the onset of the Asian financial crisis. Nevertheless, Hong Kong has yet to enact an effective statutory corporate rescue procedure. This article discusses the Hong Kong government’s corporate rescue proposals currently under consideration and the emerging use of provisional liquidation to facilitate corporate rescue in Hong Kong. It concludes by recommending that the current proposals be scrapped and that a new bill be drafted that codifies the provisional liquidation corporate rescue procedures.

Abstract:
Over the last two years significant amendments have been made to Hong Kong’s insolvency law in the form of amendments to the Bankruptcy Ordinance and the Companies Ordinance. The Bankruptcy Amendment Ordinance of 1996 amended both ordinances in major ways, Unfortunately, in a few important areas the amending legislation incorporating these changes did not clarify whether the amendments were intended to have any retrospective effect. This omission has already led to one case, Re Setaffa Investments Ltd, which addressed this issued in the context of S.264A of the Companies Ordinance. This article looks at both the Setaffa case and the more general retroactivity issues that arise due to the amendments.

Abstract:
Drastic changes were made to the Bankruptcy Law of Hong Kong after the British colony of Hong Kong became a Special Administrative Region of the People’s Republic of China and the revised law came into operation in 1998. This article explains the various issues and processes of liquidation of companies and the Corporate Rescue proposal known as “Provisional Supervision” under the Companies Bill of 2001 in Hong Kong. When the company is under liquidation the creditors’ actions will be limited to the extent of realization of the property that is under charge to the secured creditors. But, in the case of “Provisional Supervision”, all the creditors will be bounds by a moratorium for an initial period of 30 days and it may extend to six months. The employees of the insolvent company are entitled to priority of wage claims pursuant to Sec. 265 of the Companies Bill. The liquidator of the company is empowered to sell the real and personal property of the company by public auction or private contract under Sec. 198 and Sec. 199(2)(a) of the Companies Bill. The purchasers of the corporate assets should take the necessary precautions to minimize their risks.

Abstract:
Current Hong Kong insolvency law, primarily the Bankruptcy Ordinance and winding up legislation, is based on English legislation that harks back to the late nineteenth century. Now, for the first time in almost a century, a substantial overhaul of Hong Kong insolvency is under way. On 14 September 1990, at the request of the Chief Justice and the Attorney General, the Law Reform Commission of Hong Kong formed the Insolvency Sub-Committee to review and propose reforms to extant insolvency law legislation. Within the next year the Insolvency Sub-Committee intends to issue two interim reports. After issuing the second interim report, the Sub-Committee will then review the rest of insolvency law. This article does not offer a complete analysis of the likely insolvency reforms. Rather, it (i) discusses selected recommendations regarding bankruptcy that it is understood the Insolvency Sub-Committee will make in the first interim report, and (ii) notes some of the trends that appear to be emerging during the reform process.

Abstract:
This case digest summarizes the 1990 Guangdong court case of Liwan District Construction Co. v. Euro-America China Property Ltd. The case is a suit for breach of contract that was complicated because the defendant had been declared bankrupt in Hong Kong and had lost capacity to participate in a civil action in the PRC.

Abstract:
As part of the effort to reform Hong Kong’s laws in light of China’s resumption of sovereignty on 1 July 1997, dramatic changes have recently been made to Hong Kong bankruptcy law. The Hong Kong Bankruptcy (Amendment) Ordinance 1996 was enacted in December 1996, less than seven months before Hong Kong became a Special Administrative Region of China. This Ordinance makes the first comprehensive changes to Hong Kong bankruptcy law in over a century and will affect the insolvency of both individual debtors and partnerships. The new Ordinance is expected to come into operation later in 1997 after the new Bankruptcy Rules are drafted. This article presents an overview of the important changes to Hong Kong bankruptcy law made by the Ordinance. It also discusses some of the trends and policy changes that emerged during the reform process and highlights the strengths and weaknesses of the new legislation.

Abstract:
Hong Kong should reform its transnational corporate insolvency law before 1997. The article sets out the Hong Kong rules regarding the recognition of foreign liquidations and discusses the Hong Kong law relating to the winding up of foreign companies under the Companies Ordinance. The article also discusses the economic, political, and legal developments that will affect the post 1997 evolution of Hong Kong’s transnational corporate insolvency law. The weaknesses in the existing legislation and case law framework are highlighted and many legislative amendments are proposed.

Abstract:
Recent litigation before the courts in England and Hong Kong involving a PRC state-owned enterprise (China Tianjin International Economic and Technical Cooperative Corp.) highlights the practical benefits of utilizing insolvency proceedings as a means of international debt enforcement.

Abstract:
Although the English literature on cross-border insolvency dates back almost two centuries, it is only during the last two decades that the subject has truly emerged from the shadows. The growing awareness of cross-border insolvency issues is no doubt closely bound to the increasing pace of globalization, although a number of spectacular collapses – often referred to as ‘mega-insolvencies’ – have also been a factor. It is therefore of some interest to note that a small scene in the BCCI saga, surely one of the most notorious mega-insolvencies, was recently played out before the Privy Council. Wight v. Eckhardt Marine GmbH firstly explored the relationship between the debt owed to a creditor and the statutory trust that arises in English law when the court makes a winding-up order; and secondly, in relation to the private international law rule that the discharge of a debt is determined by the governing (proper) law, it examined the effect of a discharge in a situation where a creditor had already submitted a proof in the local liquidation prior to the discharge of the debt under the foreign governing law.

Abstract:
A glaring weakness in Hong Kong insolvency law has been the lack of an acceptable corporate rescue procedure. Under existing law it is difficult to reorganize or restructure a company in financial difficulty. Therefore, creditors holding fixed and/or floating charges often resort to receivership and, ultimately, unsecured creditors have little option but to petition for the liquidation of the company. From the perspectives of many of the participants, the result is often wasteful and unsatisfactory. It appears help is finally on the way. Over the past year, important developments have addressed the difficulties in rehabilitating companies in Hong Kong. Most significantly, in October 1996 the Law Reform Commission of Hong Kong published its Report on Corporate Rescue and Insolvent Trading, which proposes dramatic changes to facilitate the rescue of financially troubled companies in Hong Kong. It is anticipated that a bill will be gazetted in 1998. This article discusses the proposed changes to Hong Kong law in the Report on Corporate Rescue.

Abstract:
Most corporate insolvencies in Hong Kong are commenced by a creditor on the ground that the debtor company is unable to pay its debts. However, each year a small number of liquidations are commenced by a regulatory authority or a government official – namely, the Registrar of Companies, the Financial Secretary, the Securities and Futures Commission, or the Insurance Authority – against companies that are allegedly engaged in illegal or fraudulent activities. These filings are made on ‘public interest’, unfair prejudice, or other statutory grounds, irrespective of whether insolvency can be proved. Allowing regulatory authorities or government officials to intervene against companies through the filing of winding-up petitions is an important statutory remedy that is intended to deter companies from engaging in wrongful or fraudulent behaviour. The existing statutory framework for the commencement of liquidations by regulatory authorities and government officials is quite complicated because the relevant statutory provisions are not consolidated in a single ordinance. This article provides an overview and analysis of this statutory structure and suggests how it could be improved.

Abstract:
The need for a statutory corporate rescue mechanism has long been recognized in Hong Kong. That need was heavily underscored by the recent Asian financial crisis. Following recommendations made in 1996 by the Law Reform Commission of Hong Kong, legislation was introduced in January 2000, in the form of the Companies (Amendment) Bill 2000. The Bill proposed a regime, to be known as “provisional supervision”, which would allow a company – without having to go to court – to appoint an insolvency specialist to take over its affairs under the protection of a moratorium. Once appointed, the provisional supervisor would formulate a plan for voluntary arrangement for approval by the company’s creditors. However, after serious opposition was raised against the Bill, the provisional supervision proposals were dropped. It is anticipated that a modified provisional supervision regime will soon be put back on the legislative agenda. This paper offers a critical analysis of the provisional supervision regime contained in the Bill, with particular emphasis on the Government’s controversial proposals regarding the rights of secured creditors and the treatment of workers’ wages.

Abstract:
In the Introduction to Corporate Insolvency Law, Vanessa Finch states that her book “sets out to offer a critical appraisal of modern corporate insolvency law rather than a description of existing statutory rules and case law on the subject.” Her aims are threefold: to outline the law on corporate insolvency and the procedures and enforcement mechanisms used in giving effect to that law, to set out a theoretical framework for corporate insolvency law that will establish benchmarks for evaluating that law and any proposed reforms, and to consider whether any new approaches to insolvency institutions and rules are called for. These are ambitious aims, which Finch ably achieves. The book is a good resource for insolvency practitioners and company lawyers, insolvency policy makers, and teachers and students in common law jurisdictions. In the United Kingdom, Corporate Insolvency Law could be used as a stand alone text for teaching a corporate insolvency law course. Elsewhere it could be used as a companion volume to accompany the local insolvency materials.

Abstract:
When China resumed sovereignty over Hong Kong on July 1, 1997, Hong Kong’s economy was strong, the stock and property markets were high, and the general consensus was that the economy would continue to prosper. In the second half of 1997, an economic crisis began to engulf Asia and Hong Kong and it slid into a recession. GDP decreased rapidly, the unemployment rate rose, property values collapsed, consumer spending receded, and defaults on bad debt became more prevalent. By 1999 the Hong Kong economy started showing signs of bouncing back from the recession. The economic crisis has led to a sharp increase in the number of insolvencies in Hong Kong. It has also increased awareness of the role that insolvency law can play in facilitating economic recovery. This article discusses insolvency law reform in Hong Kong, focusing on bankruptcy law and corporate rescue.

Abstract:
The lengthy Chinese bankruptcy law reform process that began in 1994 ended on 26 August 2006, with the enactment of the PRC Enterprise Bankruptcy Law. This article discusses five controversial areas that were debated throughout the drafting process – the scope of the law, bankruptcy administration, corporate reorganisation, priorities and the protection of employee rights, and cross-border issues – and how they have been resolved in the new law. The article also discuses recent developments since the new law came into operation on 1 June 2007.

Abstract:
In the case of In re Axona International Credit & Commerce Limited, the Hong Kong liquidators of Axona (a Hong Kong company with assets in the United States) were finally able to pay the first interim dividend to Axona’s creditors in July 1992. This payment was made more than nine years after Axona was ordered to be wound up by the Hong Kong High Court and after lengthy adversarial proceedings in both Hong Kong and the United States. While no doubt frustrating for creditors, this liquidation has given rise to an important U.S. decision on the recognition of foreign bankruptcies in general, and of Hong Kong liquidations in particular.

Abstract:
The Hong Kong Bankruptcy Amendment Ordinance of 1996 was enacted in December 1996 and finally came into operation on April 1, 1998. The ordinance overhauled Hong Kong bankruptcy law for the first time in over a century. It provides for major amendments to the Hong Kong Bankruptcy Ordinance and consequential amendments to other ordinances, including the Hong Kong Companies Ordinance. The changes include substantial amendments to the avoidance powers exercisable by a trustee in a bankruptcy, and a consequential amendment to one of the avoidance powers exercisable by a liquidator in a winding up. The new avoidance powers are modeled on, and in many parts copied verbatim from, the bankruptcy avoidance powers set out in sections 339 to 343 of the United Kingdom Insolvency Act of 1986. Whereas the old avoidance powers were generally regarded as having only domestic effect and not applying to transactions occurring outside Hong Kong, recent judicial decisions in England have held that the relevant U.K. sections do have extraterritorial effect. Thus, one of the likely consequences of the recent amendments is that the new avoidance powers now have extraterritorial effect.

Abstract:
In July 1994 the Education and Manpower Branch, Government Secretariat issued a pamphlet on its proposals to introduce an old age pension scheme. Given the inadequacy of the government’s current benefits for the elderly, few would object to the creation of a formal pension scheme. This article raises two objections to the proposed pension scheme: (1) the inherent unfairness of compelling individuals – such as foreign workers, Hong Kong emigrants, and Hong Kong residents who travel for extended periods – to contribute to a pension scheme (without the possibility of receiving a rebate or exemption) from which they may never benefit, and indeed, may not be permitted to benefit, and (2) the government’s failure to admit that compelled contributions to the proposed pension scheme are in fact a tax.

Abstract:
The articles by Professors Doug Arner and Claire Hill address two aspects of securitization in emerging markets. Professors Arner’s article, Emerging Market Economies and Government Promotion of Securitization, describes the benefits of securitization, provides an overview of the key underlying elements that are necessary for the development of securitization in emerging markets, and stresses the need for government leadership in the process. Professor Hill’s article, Whole Business Securitization in Emerging Markets, focuses on the benefits and value that could result in emerging markets from pursuing a relatively new form of securitization – the securitization of whole businesses.

Abstract:
The terms “rescue culture” and “corporate rescue” have been commonly used in the commercial world for many years. In the mid-1990s, the Law Reform Commission in Hong Kong began considering corporate rescue and, in due course, recommended a regime - to be called “provisional supervision” - with marked similarities to the corporate voluntary administration in Australia. With the onset of the Asian financial crisis, and seemingly ever-rising levels of insolvency in Hong Kong, corporate rescue has remained a high-profile topic. Until now, re-structurings in Hong Kong have been conducted wholly outside of a modern statutory rescue framework. But, finally, it seems Hong Kong is close to putting its own corporate rescue regime on the statute books, following the gazetting in May 2001 of the Companies Bill 2001. Yet, even now in early 2002, some doubts remain as to the future of the bill.

Abstract:
The authors discuss a corporate governance crisis in Hong Kong involving the investigation of insolvent companies. Over the last decade the rates paid to insolvency practitioners to handle 'summary cases' in liquidation has been steeply declining. At the current rate of HK$2,558 per case, it is not possible to undertake a proper investigation of the insolvent company. To address this problem, the authors propose that the government consider establishing a special investigations unit.

Abstract:
In May 2001, the Companies (Corporate Rescue) Bill was gazetted. The Bill makes provision for a statutory corporate rescue mechanism, to be known as provisional supervision. The most controversial aspect of the Bill is the treatment of workers' wages. The Bill essentially requires that before a company may even enter into provisional supervision, it must have paid off in full all debts (and other entitlements) owing to its workers. The Bill does not, however, explain how a financially distressed company is supposed to find the cash to meet the statutory requirement. This requirement may also be criticised because it is at odds with the treatment of workers' wages in other insolvent procedures, thus leading to unfairness. This article proposes an alternative approach, one which, it is suggested, is in the interests of both financially troubled companies and their workers.

Abstract:
In April 2001, a group of insolvency professionals from the Hong Kong Special Administrative Region visited Beijing and held a constructive meeting on cross-border insolvency with a delegation of Beijing government officials and insolvency professionals. The meeting was initiated by the Foreign Economic and Trade Commission of the Beijing Municipal Government. This article describes the discussions of the meeting with some analysis of the issues concerned, with a focus on cross-border insolvency issues arising in the insolvency of foreign investment enterprises in Beijing. The article argues that China should adopt a national solution to cross-border insolvency issues and that the Mainland judiciary should be more actively involved in the process.