04 May 2015

Bankruptcy (Amendment) Bill 2015

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Introduction

On 30 April 2015, the Bankruptcy (Amendment) Bill 2015 was published in the Gazette. The amendments were proposed having regard to the ruling of the Court on the constitutionality of certain provisions in the Bankruptcy Ordinance (Cap. 6) (the “BO”) concerning the automatic suspension of the running of the period of time after which a bankrupt is discharged from bankruptcy (the “Relevant Period”)1.

The present regime

Under the present bankruptcy regime, the running of the Relevant Period will be automatically suspended under three specified circumstances under s30A(10) of the BO2:

(i)

a bankrupt has left Hong Kong before the commencement of bankruptcy (s30A (10)(a));

(ii) a bankrupt has left Hong Kong after the commencement of bankruptcy without notifying the trustee in bankruptcy of his/her itinerary and contact means (s30A(10)(b)(i)); or
(iii) a bankrupt has left Hong Kong after the commencement of bankruptcy and failed to return to Hong Kong as required by the trustee in bankruptcy (s30A(10)(b)(ii));

and the Relevant Period will only commence or resume running (as the case may be) when the bankrupt has returned to Hong Kong and notified the trustee in bankruptcy of his/her return.

S30A(10)(b)(i) of the BO was made inoperative after the ruling of the Court of Final Appeal in the case ofOfficial Receiver & Trustee in Bankruptcy of Chan Wing Hing v Chan Wing Hing [ 2006 ] 9 HKCFAR 545that the provision was unconstitutional.

S30A(10)(a) of the BO was also held by the Court of Appeal as being unconstitutional in the case ofChang Hyun Chi v Official Receiver [ 2015 ] 1 HKLRD 512. In April 2015, the Court of Appeal granted the Official Receiver leave to appeal to the Court of Final Appeal and execution of the judgment has been stayed pending determination of the appeal.

The proposed new arrangements

Under the proposed arrangements:

  1. Within 6 months after the date of the bankruptcy order, a trustee in bankruptcy may apply to the Court for an order that the Relevant Period is treated as not commencing to run (“Non Commencement Order”) on the date of the bankruptcy order if the trustee has appointed a day for the bankrupt to attend the initial interview with the trustee for the purpose of administration of the bankrupt’s estate and for the bankrupt to provide information concerning his/her affairs, dealings and property, and the bankrupt has failed to complete the initial interview such that the administration of the bankrupt’s estate was prejudiced;
  2. Upon the application of the trustee, if the Court is satisfied that the bankrupt has failed to complete the initial interview and that such failure has prejudiced the administration of the bankrupt’s estate, it may make a Non Commencement Order. The Court must also determine the term(s) to be complied with by the bankrupt for the Relevant Period to commence to run; and
  3. The trustee must file a notice with the Registrar of the High Court within 14 days after a bankrupt has complied with the term(s) such that the Relevant Period will commence to run. The Relevant Period will then commence to run on the date on which the term(s) are complied with.

Legislative timetable

The legislative timetable of the Bill is as follows:

Publication in the Gazette 30 April 2015
First reading and commencement of second reading in the Legislative Council 13 May 2015
Resumption of second reading To be notified

It was proposed that the new arrangements will commence operation on 1 November 2016. The relevant provisions under section 30A(10) of the BO will continue to apply to those cases where the bankruptcy order is made before the commencement of the Bill.

1 Four years for first-time bankrupts or five years for repeat bankrupts
2 There is also separate mechanism upon which the trustee in bankruptcy may apply to the Court to object to the discharge of the bankrupt under s30A(4) of the BO.

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KEY CONTACT

Malcolm Kemp

Malcolm Kemp
Partner

T:  +852 2533 2701 M:  +852 9485 9376 Email Malcolm | Vcard Office:  Hong Kong

Alexander Tang

Alexander Tang
Senior associate

T:  +852 2533 2881 M:  Email Alexander | Vcard Office:  Hong Kong