When Government Intervenes : Winding Up Fraudulent Companies in Hong Kong

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