Recent Changes to Hong Kong Bankruptcy Laws; a win for creditors and the environment

The Government of Hong Kong continues its push towards favouring digitisation over using hardcopy documents.  The new changes to local bankruptcy laws allows: (1) electronic service of statutory demands; (2) using electronic bundles and skeletons for winding-up and bankruptcy applications; and (3) allowing electronic submission of documents to the Official Receiver. 

Electronic service of statutory demands: A game changer for creditors and debtors

The introduction of electronic service of statutory demands through amendments to Practice Direction 3.1 is a significant shift that has practical implications for creditors and debtors. 

For creditors, this change provides a powerful new tool to serve statutory demands, especially in cases where a debtor may be trying to evade service.  Creditors can now serve debtors more quickly and efficiently by electronic service through email, WhatsApp, WeChat or “other similar means” (the wording in Practice Direction 3.1).

However, service of a statutory demand electronically is only possible if: (1) the debtor and the creditor agreed to use electronic means of communication; or (2) the debtor has used any electronic means of communication with the creditor during the 12 months prior to the date of the statutory demand.

For debtors, monitoring their electronic communications closely is now more critical than ever.  With the recent changes it is much harder to evade service, and failure to respond to a statutory demand can have serious and permanent consequences e,g, having a bankruptcy order made against you.

However, there are open questions surrounding the specifics of these changes, such as:

• How the court will handle undeliverable emails.
• Which electronic accounts will be considered authoritative.
• What is necessary to show that the debtor has used electronic means to communicate with the creditor during the relevant 12-month period.
• Whether “other similar means” will extend to other electronic platforms, such as service by air-dropping a statutory demand as a Non-Fungible Token (as has been accepted as service in other jurisdictions, such as England and Wales). 

No doubt these issues will be dealt with by the Hong Kong Courts in the coming months, so watch this space for updates.

Electronic bundles and skeletons for applications: a win for nature

In addition to statutory demands, there have also been changes to electronic bundles and skeletons for applications relating to company winding-up and bankruptcy matters.  Under new Practice Direction 3.8, parties can serve documents in electronic form to the court via the e-Lodgement platform or USB or via USB to all other parties, eliminating the environmental waste associated with hard copy documents. 

For clients, this change reduces the monetary costs imposed by using physical paperwork by making the process of submitting and accessing these documents more efficient.  This is particularly beneficial for clients who are dealing with complex cases with many documents.

The Official Receiver’s electronic submission system: continuing the culture shift

The Official Receiver performs various statutory duties relating to bankruptcy and winding up, including being a provisional trustee on the making of bankruptcy orders, a trustee in bankruptcy and the trustee of last resort under the Bankruptcy Ordinance (Cap. 6), as well as being the provisional liquidator or the liquidator of last resort in court winding-up cases under the Companies (Winding-Up and Miscellaneous Provisions) Ordinance (Cap. 32).  In discharge her duties, the Official Receiver receives an average of 180,000 documents and forms annually from various stakeholders.

Implementing the Official Receiver’s electronic submission system via the Bankruptcy and Companies Legislation (Miscellaneous Amendments) Bill 2023 (gazetted in July 2023) is another example of a Government Department reducing its reliance upon hardcopy documents. 

This system, set to be implemented in phases starting from the fourth quarter of this year, is designed to automate the processing of documents, making it easier and more efficient for clients to comply with their obligations. 

Key takeaways

While there may be some initial challenges in adapting to these digitisation changes, they offer numerous benefits for clients, including simplified processes, reduced costs, and improved efficiency.  Adapting to them is vital to successfully navigating the bankruptcy process in the digital age.

Ian De Witt and Elizabeth Chan

If you would like to discuss any of the matters raised in this article, please contact:

Ian De Witt

Partner | Email

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.