Bankruptcy in Hong Kong: The Process, the Costs, the Consequences

Free help first (read this before anything else)

• The official body: the Official Receiver’s Office (ORO) administers Hong Kong’s bankruptcy system and publishes guides, an FAQ and all the forms.
• Free legal advice: the Duty Lawyer Service’s Free Legal Advice Scheme has no means test — see legal aid and free advice .
• Harassed by collectors: see being chased for a debt ; report intimidation to the Police.
• The formal alternative: a voluntary arrangement (IVA) .

Important: this page explains the system. Whether to petition for bankruptcy — or propose a voluntary arrangement — is a major personal decision, and this site does not recommend either route. Use the free channels above or independent professionals before deciding.

What bankruptcy does, and what it does not do

Two things happen at once when the order is made: enforcement stops, and your property goes.

The first is s.12(1). On the making of a bankruptcy order the Official Receiver becomes provisional trustee, and thereafter "except as directed by this Ordinance, no creditor to whom the bankrupt is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the bankrupt in respect of the debt, nor shall proceed with or commence any action or other legal proceedings, unless with the leave of the court and on such terms as the court may impose."

Note the two qualifiers, both inside that one sentence: what is stopped is a creditor with a provable debt, and the court may give leave for that creditor to proceed anyway. The very next subsection adds a third — s.12(2): "This section shall not affect the power of any secured creditor to realize or otherwise deal with his security." A mortgagee is not held back by s.12(1).

The second is s.43. Under s.43(1) the estate comprises "all property belonging to or vested in the bankrupt at the commencement of the bankruptcy". But s.43(2) expressly excludes two classes:

• "such tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation";
• "such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his family."

Section 43(3) further excludes property the bankrupt holds on trust for someone else. So the means of earning a living and the basic contents of a home are carved out by the statute itself.

But the carve-out has a door in it, sitting immediately alongside. Section 43B(1) lets the trustee claim excluded property by written notice where "it appears to the trustee that the realisable value of the whole or any part of that property exceeds the cost of a reasonable replacement for that property or that part of it". Section 43B(3) then requires the trustee to buy the bankrupt a reasonable replacement out of the estate, and says that duty "has priority over the obligation of the trustee to distribute the estate". In plain terms: a work vehicle worth a great deal can be taken and replaced with an adequate one.

Who may petition, and on what conditions

Section 3(1) lists four classes of petitioner: one or more of the debtor’s creditors; the debtor himself; the nominee of, or any person "(other than the debtor)" who is for the time being bound by, a voluntary arrangement proposed by the debtor and approved by his creditors; and the Official Petitioner where a criminal bankruptcy order has been made.

That fourth class turns on a term defined in a different ordinance. Criminal Procedure Ordinance (Cap. 221) s.84A(1) provides that where a person is convicted of an offence before the court and it appears to the court that "as a result of the offence, or of that offence taken together with any other relevant offences, loss or damage (not attributable to personal injury) has been suffered by one or more persons whose identity is known to the court", and that "the amount, or aggregate amount, of the loss or damage exceeds $150,000", the court may, in addition to dealing with the offender in any other way "(but not if it makes a compensation order against him under section 73)", "make an order, to be called a criminal bankruptcy order, against him in respect of the offence or, as the case may be, that offence and any other relevant offences". In other words, if the court has already made a compensation order under s.73 for the same offence, it cannot also make a criminal bankruptcy order. Section 84A(6) adds that "court" in that section "includes the District Court". The starting point for this class of petition is a conviction, not a debt.

There is a Hong Kong connection requirement first, which is widely missed. Section 4(1) provides that no petition may be presented under s.3(1)(a) or (b) unless the debtor "is domiciled in Hong Kong", "is personally present in Hong Kong on the day on which the petition is presented", or at any time in the 3 years ending with that day "has been ordinarily resident, or has had a place of residence, in Hong Kong" or "has carried on business in Hong Kong". Section 4(2) extends carrying on business to business carried on by a firm or partnership of which the debtor is a member, or by an agent or manager.

A debtor petitioning for himself: no minimum. Section 10(1) allows a debtor’s petition "only on the ground that the debtor is unable to pay his debts"; s.10(2) requires a statement of affairs; and s.10(3) says in terms that a debtor’s petition "may be presented whether or not the aggregate amount of indebtedness is equal to or exceeds the amount provided for a creditor’s petition under section 6(2)(a)."

A creditor petitioning: $10,000 is one of four conditions, not the condition. Section 6(2) reads "Subject to sections 6A to 6C, a creditor’s petition may be presented to the court in respect of a debt or debts if, but only if, at the time the petition is presented" — those opening words are where the expedited route below comes from — and then all four of the following must hold:

Stating (a) without (b) to (d) leaves a reader believing that owing ten thousand dollars is itself enough. It is not: the debt must be liquidated (a fixed sum, not a disputed damages claim), must be unsecured, must clear the s.6A gate, and there must be no set-aside application pending.

The pressure runs the other way too: paragraph (a) speaks of an aggregate, and there can be more than one petitioner. The words in s.6(2)(a) are "the amount of the debt, or the aggregate amount of the debts"; s.3(1)(a) allows a petition "by one of the debtor’s creditors or jointly by more than one of them"; and s.6(1) provides that "A creditor’s petition must be in respect of one or more debts owed by the debtor, and the petitioning creditor or each of the petitioning creditors must be a person to whom the debt or (as the case may be) at least one of the debts is owed." Put together: a creditor owed $9,000 is under the figure standing alone, but petitioning jointly with a creditor owed $2,000 clears paragraph (a) — with (b), (c) and (d) still to be satisfied on their own terms.

Paragraph (a) also carries its own flex: the words "or a prescribed amount" are part of paragraph (a) itself, and s.6(5) provides: "The Financial Secretary may, by regulation, prescribe an amount greater than $10,000 for the purposes of subsection (2)(a)." The figure is one a regulation can raise.

Most relevant to: anyone who has received a demand letter threatening a bankruptcy petition. The sender still has the next step to take.

The statutory demand and the three weeks

Whether a debtor "appears to be unable to pay" for the purposes of s.6(2)(c) is not a matter of impression; s.6A defines it exhaustively. Section 6A(1) reads "the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and either" — and then offers exactly two routes:

• s.6A(1)(a) — the creditor "has served on the debtor a demand (known as the statutory demand) in the prescribed form requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, at least 3 weeks have elapsed since the demand was served and the demand has been neither complied with nor set aside in accordance with the rules"; or
• s.6A(1)(b) — execution or other process issued on a judgment or order "has been returned unsatisfied in whole or in part."

Where the debt is not yet payable, s.6A(2) sets out a parallel route: a statutory demand requiring the debtor to satisfy the creditor that there is a reasonable prospect of payment when it falls due, "at least 3 weeks have elapsed since the demand was served", and the demand has been "neither complied with nor set aside in accordance with the rules".

Those three weeks are the single most actionable deadline in this article. Service of the statutory demand starts the clock; the rules provide a set-aside route, and while a set-aside application is outstanding s.6(2)(d) blocks the petition.

But the three weeks are not absolute — as to presentation. Section 6C (expedited petition) allows a petition to be "presented before the end of the 3-week period there mentioned if there is a serious possibility that the debtor’s property or the value of any of his property will be significantly diminished during that period and the petition contains a statement to that effect." Separately, s.6(4) allows a petition notwithstanding s.6(2)(c) and (d) where there are reasonable grounds to believe the debtor intends to depart, or has departed, from Hong Kong knowing that this "would result in defeat or delay for his creditors".

The order itself, though, is locked behind the three weeks by s.6D(2). It provides: "In a case in which the petition contains such a statement as is required by section 6C, the court shall not make a bankruptcy order until at least 3 weeks have elapsed since the service of any statutory demand under section 6A." What s.6C moves forward is the presentation of the petition, not the making of the order: on the question of when an order can be made, the three weeks are hard. Section 6D(3) separately lets the court dismiss the petition where the debtor has offered to secure or compound for the debt, acceptance of the offer would have required dismissal, and "the offer has been unreasonably refused".

A different provision can stop a petition altogether: the interim order that belongs to a voluntary arrangement. Section 20(2) provides that while an interim order is in force "(a) no bankruptcy petition relating to the debtor may be presented or proceeded with; and (b) no other proceedings, no execution or other legal process and no distress may be commenced or continued against the debtor or his property except with the leave of the court." The order comes from an application under s.20A; s.20C(1)(c) bars the court from making one where the debtor has applied for an interim order in the 12 months ending with the day of the application; and s.20C(6) provides that, except as otherwise provided in ss.20A to 20L, the order ceases to have effect at the end of 14 days from the day it was made. That route belongs to the voluntary arrangement side; what is set out here is only where it meets a bankruptcy petition.

The official costs, and which instrument fixes them

The deposits are not an ORO administrative charge; they are set by the Bankruptcy Rules. Cap. 6 sub. leg. A, r.52(1) requires the petitioner, on presentation, to pay the Official Receiver a deposit of:

• "in the case of a debtor’s petition, the sum of $8,000"; or
• "in the case of a creditor’s petition, the sum of $11,250."

(The present figures were set by L.N. 169 of 2013.) Rule 52(2) adds that "No petition shall be received unless the receipt of the Official Receiver for the deposit payable under subrule (1) is produced to the Registrar" — so without it the petition cannot be filed at all. Rule 52(4) applies the deposit to the fees, charges and percentages prescribed under the Bankruptcy (Fees and Percentages) Order and payable to the Official Receiver, and to "costs, charges and expenses incurred or authorized by the Official Receiver, whether acting as trustee or otherwise" — these are the Official Receiver’s costs, not a private trustee’s remuneration, which ranks under s.37(1). Rules 52(5) to (7) deal with accounting for and repaying any unexpended balance.

The voluntary arrangement carries its own deposit, and it is not paid to the Official Receiver. Rule 52A(1) provides that, unless the applicant is also the nominee, an applicant for an interim order under s.20A must at the time of the application "deposit with the nominee the sum of $12,150", plus any further sum agreed or directed, to cover the nominee’s fees, expenses and remuneration for the work done on the voluntary arrangement; and r.52A(2): "This rule applies whether or not the voluntary arrangement is approved by the creditors." (L.N. 77 of 1998.)

The fee on the petition itself is fixed by legislation as well. Bankruptcy (Fees and Percentages) Order (Cap. 6 sub. leg. C), Schedule, Table A item 3: "Bankruptcy petition 1,045.00", with the note "This fee includes any fee on answering a petition or setting down for hearing" (L.N. 127 of 2007). Paragraph 3 of the Order provides that the fees and percentages in the Schedule "shall be taken in the office of the Official Receiver or in the Registry of the High Court as the case may require"; Table A’s own columns are "Item", "Description" and "Fee $", and it does not label its entries court fees.

Note that $11,250 appears twice in the statute book with different meanings. Besides the creditor’s deposit above, Table B para. 11 of the same Order provides: "Notwithstanding the fees and charges prescribed in the foregoing paragraphs but subject to the availability of funds, where the Official Receiver acts as trustee to administer a bankrupt’s property, the total fees and charges under this Table shall not be less than $11,250." One is a deposit paid on filing; the other is a floor on what the Official Receiver charges the estate. Same number, different thing.

There is a remission power too, and whether it reaches these petition-stage figures is not settled by the wording. Section 114(2) provides: "The court may remit the payment of any particular fee or fees due from any bankrupt, or any part thereof, either absolutely or on such terms as it may think fit." The difficulty is timing and vocabulary: bankruptcy only commences with the day the order is made (s.30), and the Ordinance calls the petitioner a debtor before that day and a bankrupt only after it; the deposit and the petition fee above both have to be paid before the petition can even be received (r.52(2)), and on a creditor’s petition it is the creditor — who never becomes a bankrupt — who pays. Whether s.114(2)’s remission power reaches these pre-order figures, as against only fees that arise after a bankruptcy order (such as the administration-fee floor in Table B para. 11 above), is not something the wording resolves.

The timetable: when it starts, when it ends

Section 30 provides that bankruptcy "commences with the day on which the order is made" and "continues until he is discharged under section 30A or 30B".

Discharge is automatic, and that is s.30A(1): "Subject to this section and section 30AC, a bankrupt is discharged from bankruptcy by the expiration of the relevant period." Those opening words are where s.30A(3) and the non-commencement order below sit.

The base periods for the relevant period are in s.30A(2):

• (a) "where a person has not previously been adjudged bankrupt, the period of 4 years";
• (b) "where a person has been previously adjudged bankrupt, the period of 5 years", both periods "beginning with the commencement of the bankruptcy".

But s.30A(3) can stop that clock — and first-time bankrupts are within it. Where the court is satisfied on the trustee’s or a creditor’s application that a valid objection on a s.30A(4) ground has been made, it "may order that the relevant period shall cease to run for such period, not exceeding, in the case of a person who":

• (a) "has not previously been adjudged bankrupt, 4 years"; or
• (b) "has previously been adjudged bankrupt, 3 years".

Working the numbers: 4 + 4 = 8; 5 + 3 = 8. Under a single suspension order, both paths reach 8 years. Note what the 4 and the 3 attach to: s.30A(3) caps the period specified "in the order", and the section does not in terms limit the court to one such order. The common formulation presents 4 years for first-timers and 5 years "extendable to 8" for repeats, which implies first-time bankrupts carry no such exposure. The section does not say that.

Section 30A(4) opens "Subject to subsection (4A)" and lists eight grounds of objection, including that the bankrupt "is likely within 5 years of the commencement of the bankruptcy to be able to make a significant contribution to his estate" (first-time discharges only); that discharge "would prejudice the administration of his estate"; that he "has failed to co-operate"; that his conduct "has been unsatisfactory"; that he "has departed from Hong Kong and has failed forthwith to return"; that he "has continued to trade after knowing himself to be insolvent"; that he has committed an offence under s.129 or ss.131 to 136; and that he "has failed to prepare an annual report of his earnings and acquisitions for the trustee". Section 30A(4A) then provides that a matter referred to in s.30AB(1)(b)(i) or (ii) does not form the basis for those grounds once the trustee has applied for a non-commencement order and the court has approved or dismissed the application.

Procedurally: s.30A(5) requires the trustee to notify creditors "Not less than 3 months before the end of the relevant period"; s.30A(6) requires an objector to notify the court "not less than 14 days before the end of the relevant period" (a creditor must also notify the trustee). Section 30A(7) lets the bankrupt apply at any time to have a suspension lifted.

A second route can stop the clock before it ever starts: the non-commencement order. Section 30AB(1) lets the trustee apply where the bankrupt failed to attend an initial interview, or attended but failed to provide the information reasonably required, and the administration of the estate "was prejudiced" by that; s.30AB(2) requires the application within 6 months of the bankruptcy order, or a longer period the court specifies. Section 30AC(2)(a) provides that such an order must "specify that the relevant period for the bankrupt is treated as not commencing to run on the date of the bankruptcy order" and specify terms the bankrupt must comply with first; on compliance the trustee files a notice within 14 days and the period runs from the date stated in it. The whole non-commencement-order regime carries its own temporal gate: s.30AB(5) provides "This section only applies to a bankrupt against whom a bankruptcy order is made on or after 1 November 2016" — it is not available against a bankruptcy order made before that date.

There is a route in the other direction as well: early discharge. Section 30B(1) allows a bankrupt who "has not previously been adjudged bankrupt" to apply "at any time", and one who "has been previously adjudged bankrupt" to apply "not less than 3 years after the date of the bankruptcy order". Section 30B(2) then lists ten situations in which the court must not make the order — including a previous voluntary arrangement or composition; unsecured liabilities exceeding 150% of the previous year’s income; failure to disclose a beneficial interest, an existing liability, or expected income; misleading conduct after the order in respect of amounts exceeding $15,000; acting as a director contrary to Cap. 622 s.480 without leave; that the bankrupt "has failed or refused to give his passport or other travel document to the trustee when requested to do so"; failure to co-operate; and a relevant period not yet running because of a non-commencement order. Section 30B(3) requires 28 days’ notice to the trustee. Clearing all ten bars is not the end of it: s.30B(4) supplies a separate objection route — "The trustee or a creditor may object to the discharge of the bankrupt on one or more of the grounds set out in section 30A(4) and the court may decline to make an order discharging the bankrupt if it is satisfied that the objection is valid." The eight s.30A(4) grounds listed above for ordinary discharge apply equally here.

Discharge leaves two tails behind it. Section 30A(8) provides that a discharged bankrupt must still give information and attend on the trustee as required to complete the administration, and "if a discharged bankrupt does not comply with the requirements of this subsection, he shall be guilty of a contempt of court". Section 30A(9) provides that the court "may, as a condition of granting the discharge, order the bankrupt to continue to make contributions to his estate in such amount and for such period as it considers appropriate but not exceeding a period of 8 years from the date the bankruptcy order was made."

That 8 years is not the 8 years above. The s.30A(3) figure is how long the bankruptcy itself can run; the s.30A(9) figure is how long contributions can continue after discharge. Both run from the date of the bankruptcy order, but they measure different things.

The restrictions during bankruptcy

These come from provisions scattered through the Ordinance, not from any single guidance page.

Credit: the threshold is $100. Section 131(a) makes an undischarged bankrupt guilty of an offence "if either alone or jointly with any other person he obtains credit to the extent of $100 or upwards from any person without first informing that person that he is an undischarged bankrupt". Paragraphs (b) and (c) add disclosure and publication requirements for trading under another name. It is probably the easiest one to breach in ordinary life.

Income: it takes a court order, and there is a floor. Section 43E(1) provides that the court "may, on the application of the trustee, make an order (an income payments order) claiming for the bankrupt’s estate so much of the income of the bankrupt during the period for which the order is in force as may be specified in the order." Section 43E(2) immediately adds: "The court shall not make an income payments order the effect of which would be to reduce the income of the bankrupt below what appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family." Section 43E(6) defines income as "every payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled".

Property acquired during bankruptcy: it must be claimed, not automatically swept in. Section 43A(1) lets the trustee "by notice in writing claim for the bankrupt’s estate any property which has been acquired by, or has devolved upon, the bankrupt since the commencement of the bankruptcy"; s.43A(2) excludes s.43(2) or (3) property and anything acquired after discharge; and s.43C(1)(a) requires the notice within 42 days beginning with the day on which it first came to the trustee’s knowledge "that the property in question had been acquired by, or had devolved upon, the bankrupt" — the different trigger in s.43C(1)(b), the day the property itself first came to the trustee’s knowledge, governs s.43B notices — except with the leave of the court.

One report a year, and failing to file it is a criminal offence. Section 43A(6) requires an undischarged bankrupt to submit to the trustee "on each anniversary of the making of the bankruptcy order against him, a statement of his earnings during the preceding year and details of any property he acquired during that period." Section 43A(7): "A bankrupt who fails or refuses to comply with subsection (6) is guilty of an offence and is liable to imprisonment for 6 months." Section 43A(8) adds that the court may refuse to discharge a bankrupt who has not complied.

The home you live in: six months, extendable by six. Section 43F(1) provides that where a bankrupt normally resides in premises comprised in his estate, "he shall be entitled to continue residing in such premises for a period of 6 months after the making of the bankruptcy order and the court may, on application before the expiry of the 6 month period, make an order extending the entitlement for a further period not exceeding 6 months." But s.43F(2) sits right after it: "Where the bankrupt makes an application for an extension, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt’s creditors outweigh all other considerations."

Travel: the Ordinance imposes no general travel ban, but three provisions bear on it. Section 30A(4)(e) makes it a ground of objection to discharge that the bankrupt "has departed from Hong Kong and has failed forthwith to return to Hong Kong following a request to do so from the Official Receiver or the trustee". Section 135 makes it an offence for a person adjudged bankrupt who, after the presentation of the petition, or within 6 months before its presentation, quits Hong Kong taking with him — or attempts or prepares to do so — "any part of his property to the amount of $100 or upwards, which ought by law to be divided amongst his creditors", unless he proves he had no intent to defraud. The "after / within 6 months before presentation" window governs the timing of the departure, not the timing of the adjudication of bankruptcy. Section 136 makes it an offence to conceal oneself, absent oneself or quit Hong Kong with intent to avoid service or examination or "otherwise to defeat, embarrass or delay any proceedings against him in bankruptcy", with a presumption covering the same conduct after the presentation of the petition as well as within the 3 months before it. Section 27(1) separately allows the court to issue a warrant of arrest, but each of its paragraphs carries its own condition: paragraph (a) applies only "if after presentation of a bankruptcy petition by or against him, it appears to the court that there is probable cause for believing that he has absconded, or is about to abscond", with a view to avoiding payment of a debt, service of the petition, appearance, examination, "or of otherwise avoiding, delaying or embarrassing proceedings in bankruptcy against him"; paragraph (b) is likewise conditioned on a petition having been presented; and paragraphs (c) to (e) each turn on something else. Until a petition is presented, (a) and (b) do not bite. What the Ordinance regulates is intent and co-operation, not travel as such.

Publicity: what the Ordinance requires is the Gazette. Section 16 provides that notice of every bankruptcy order, "stating the name, address and description of the debtor, the date of the order, and the date of the petition, must be published by the specified means by the Official Receiver." Section 2A(1) defines the specified means as publication "in a medium specified in Schedule 4", and Schedule 4 presently lists a single item: the Gazette. Section 2A(2) empowers the Secretary for Financial Services and the Treasury, by notice in the Gazette, to add a medium to Schedule 4, delete one from it, or "otherwise amend that Schedule" — so the reach of "specified means" can change without amending the Ordinance.

Two rules are also worth knowing. Bankruptcy Rules r.53 lets the Official Receiver register a memorial of the petition in the Land Registry against property registered in the debtor’s name, an alias, a t’ong name, or "the name of any spouse of the debtor"; r.73 is the counterpart for the order, but it differs on two points: the registering officer is "the trustee", not the Official Receiver ("Where a bankruptcy order is made, the trustee may register a memorial of such bankruptcy order in the Land Registry"), and it reads "the name of the spouse of the debtor" where r.53 reads "any spouse". Either way, a spouse’s property can carry the memorial.

Deeper: what discharge does not release

The main clause of s.32(2) is that discharge "releases him from all the bankruptcy debts" — but it opens with "Subject to subsections (1) and (3) to (8)". Those seven subsections are the exception list:

• s.32(1)(aa) — liability under a confiscation order made under the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405), or an external confiscation order registered under it;
• s.32(3) — "Discharge does not affect the right of any secured creditor of the bankrupt to enforce his security for the payment of a debt from which the bankrupt is released";
• s.32(4) — "any debt or liability incurred by means of any fraud or fraudulent breach of trust to which he was a party", or one where forbearance was obtained by fraud;
• s.32(5) — "any liability in respect of a fine imposed for an offence or from any liability under a recognizance", except, "in the case of a penalty imposed for an offence under an enactment relating to the public revenue or of a recognizance", with the consent of the Financial Secretary;
• s.32(6) — damages for personal injuries, released only "to such extent and on such conditions as the court may direct";
• s.32(7) — such other prescribed bankruptcy debts as are not provable;
• s.32(8) — this is the direct answer to "does my family get dragged in": "Discharge does not release any person other than the bankrupt from any liability (whether as partner or co-trustee of the bankrupt or otherwise) from which the bankrupt is released by the discharge, or from any liability as surety for the bankrupt or as a person in the nature of such a surety."

In short: a guarantor does not walk free because the principal debtor was discharged. Section 32(2)(b) separately provides that discharge has no effect on liability to make continuing contributions under a s.30A(9) order.

Deeper: can assets be moved before petitioning?

The Ordinance addresses this directly, with look-back periods that are longer, and easier to prove, where an associate is involved.

Section 49(3) defines a transaction at an undervalue as one where the debtor "makes a gift to that person or he otherwise enters into a transaction with that person on terms that provide for him to receive no consideration"; enters into a transaction "in consideration of marriage"; or enters into a transaction "for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by the debtor". Section 49(1) lets the trustee apply to the court where such a transaction was entered into at a "relevant time", and s.49(2) requires the court to "make such order as it thinks fit for restoring the position to what it would have been if that debtor had not entered into that transaction."

"Relevant time" is defined by s.51(1), counting back from the day the petition was presented:

But the look-back periods above are only the gateway for an "unfair preference" — the court must also be satisfied the debtor was influenced by a desire to produce the preferential effect before it will make an order. Section 50(1) lets the trustee apply to the court where a debtor has, at a relevant time, given an unfair preference to any person; but s.50(4) expressly limits that: "The court shall not make an order under this section in respect of an unfair preference given to any person unless the debtor who gave the unfair preference was influenced in deciding to give it by a desire to produce in relation to that person the effect mentioned in subsection (3)(b)." Section 50(5) then supplies a presumption: "A debtor who has given an unfair preference to a person who, at the time the unfair preference was given, was an associate of his (otherwise than by reason only of being his employee) is presumed, unless the contrary is shown, to have been influenced in deciding to give it by such a desire as is mentioned in subsection (4)." In other words: for an associate, the desire is presumed and the recipient bears the burden of rebutting it; for anyone else, the trustee must prove the debtor had that desire. Not every payment or transfer inside the look-back window is automatically clawed back — the time limit is only one condition; the desire (or its presumption) is the operative test.

Section 51(2) adds a further requirement — outside the last 2 years for an undervalue transaction, the debtor must have been insolvent at the time or become insolvent in consequence — but the same subsection immediately provides that "the requirements of this subsection are presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a debtor with a person who is an associate of his (otherwise than by reason only of being his employee)". Section 51(3) defines insolvency as inability to pay debts as they fall due, or assets worth less than liabilities taking contingent and prospective liabilities into account.

Separately, s.41 provides that a bankrupt’s spouse "shall not be entitled to claim any dividend as a creditor in respect of any money or other estate, lent or entrusted to the bankrupt until all claims of the other creditors of the bankrupt for valuable consideration in money or monies worth have been satisfied."

Work: four ordinances, four different mechanisms

"A bankrupt cannot be a solicitor, an estate agent, a securities dealer or a director" compresses four quite different legal consequences into one sentence. All four restrictions below come from ordinances other than the Bankruptcy Ordinance, and the four mechanisms are not alike — though the Bankruptcy Ordinance is not itself silent on office-holding; it simply does not reach these four callings. The four rows are also not an exhaustive list; other regulated callings have their own ordinances.

The Ordinance’s own two provisions bear on one office: trustee in bankruptcy. Section 79A provides that "No person being an undischarged bankrupt and no body corporate shall be qualified for appointment to the office of trustee, and— (a) any appointment made in contravention of this section shall be void; and (b) where any such person or any body corporate acts as trustee, such person or body corporate shall be liable to a fine at level 2." Section 95 provides: "If a bankruptcy order is made against a trustee he shall thereby vacate his office of trustee." That second one is the same automatic-vacation mechanism as Cap. 159 s.6(7) below, applied to a different office. Section 131(b) and (c) separately impose disclosure and publication requirements on an undischarged bankrupt who trades under a name other than his own.

Director: Cap. 622 s.480(1) provides that "A person who is an undischarged bankrupt must not act as director of, or directly or indirectly take part or be concerned in the management of, a company, except with the leave of the Court by which the person was adjudged bankrupt." The prohibition has a statutory exit. Section 480(3) provides the Court "must not give leave for the purposes of this section unless notice of intention to apply for it has been served on the Official Receiver", and s.480(4) requires the Official Receiver, if of the opinion that granting it would be contrary to the public interest, to "attend the hearing of, and oppose the granting of, the application." Penalties are in s.480(2): on indictment "a fine of $700,000 and to imprisonment for 2 years", on summary conviction "a fine of $150,000 and to imprisonment for 12 months". Section 480(5) gives "company" a wider meaning than it might first appear: it provides that in subsection (1), "company (公司) has the meaning given by section 168C(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32)", and Cap. 32 s.168C(1) defines "company", beyond a Cap. 622 company, to also include "(b) an unregistered company within the meaning of Part X (other than a partnership, whether limited or not, or an association)—(i) wherever incorporated; (ii) carrying on business in Hong Kong or which has carried on business in Hong Kong; and (iii) which is capable of being wound up under this Ordinance", and "(c) a registered non-Hong Kong company." In other words, the prohibition is not confined to Hong Kong-incorporated Cap. 622 companies — it reaches directorships of foreign companies carrying on business in Hong Kong too. (The rule is sometimes attributed to Cap. 32. Cap. 6 s.30B(2)(g) still refers to "section 156 of the Companies Ordinance (Cap. 32) as in force from time to time before the commencement date* of section 2 of Schedule 9 to the Companies Ordinance (Cap. 622)", which is a savings formulation; the live provision is Cap. 622 s.480.)

Solicitor: Cap. 159 s.6(7) provides that "Where the name of a solicitor is removed from or struck off the roll of solicitors or where a solicitor becomes bankrupt, the practising certificate of that solicitor shall automatically determine and in any such case no part of the fee paid in respect thereof shall be repayable." This is the only one of the four that operates automatically and offers no leave route. Cap. 159 also contains s.26A(1)(d), which makes the Law Society’s Schedule 2 intervention powers exercisable where "a solicitor or foreign lawyer" "has become bankrupt or has entered into a voluntary arrangement with his creditors within the meaning of the Bankruptcy Ordinance (Cap. 6)" — note that this paragraph lists the two together, which matters for the voluntary arrangement guide .

Securities licensee: the verb in Cap. 571 s.195(1) is "may", and the power is itself qualified — "Subject to section 198, the Commission may revoke a licensed person’s licence ... or suspend a licensed person’s licence" in the listed circumstances. The circumstance in s.195(1)(a)(i) is that "the licensed person enters into a voluntary arrangement with creditors, or has a bankruptcy order made against him, under the Bankruptcy Ordinance (Cap. 6)". Again the two are listed together.

Section 198 is not just a name-check; s.198(1) has substance of its own. It provides: "The Commission shall not exercise any power under section 194(1) or (2), 195(1)(a), (b) or (c), (2) or (7), 196(1) or (2) or 197(1)(a) or (b) or (2) without first giving the person in respect of whom the power is to be exercised a reasonable opportunity of being heard." In other words, before the Commission exercises the s.195(1)(a)(i) power to revoke or suspend, it must first give the licensee a reasonable opportunity to be heard.

The same Ordinance carries a less-noticed power: the SFC can petition. Section 212(2) provides that if "(a) grounds exist for the presentation of a petition for a bankruptcy order against a licensed representative by his creditor in accordance with the Bankruptcy Ordinance (Cap. 6); and (b) it appears to the Commission that it is desirable in the public interest to present a petition for a bankruptcy order against the licensed representative in accordance with that Ordinance, the Commission may present a petition for a bankruptcy order against the licensed representative in accordance with that Ordinance, and that Ordinance shall apply to such petition as it applies in relation to a petition presented by a creditor." That closing clause is how it meets s.3(1) above: the Commission is not a fifth class of petitioner but comes in through the creditor’s class. For a licensed representative this is more immediate than s.195 — the regulator itself can be the party presenting the petition.

Estate agent: Cap. 511 s.19(2) provides that "In determining whether or not a person is fit and proper for the purpose of holding an estate agent’s licence, the Authority shall have regard to the following", of which (a) is "the fact that the person is an undischarged bankrupt, or has, within the 5 years immediately prior to the day on which the Authority considers, or, where appropriate, begins to consider the matter, made a composition or scheme of arrangement with his creditors". That is a mandatory consideration, not an automatic disqualification — and it too extends to a composition or scheme, with a 5-year look-back.

The same Ordinance places the same factor in two further provisions, so the estate agent row in fact covers three capacities. Section 21(3) provides that "In determining whether a person is fit and proper for the purpose of holding a salesperson’s licence, the Authority shall have regard to the following", and its paragraph (a) is word for word s.19(2)(a): "the fact that the person is an undischarged bankrupt, or has, within the 5 years immediately prior to the day on which the Authority considers, or, where appropriate, begins to consider the matter, made a composition or scheme of arrangement with his creditors". Section 20(3) does the same for a director of a licensed company — "In determining whether a person who is a director of a company referred to in subsection (1) is a fit and proper person for the purposes of this Ordinance, the Authority shall have regard to the following" — with (a)(i) reading "where the person is an individual, such individual is an undischarged bankrupt, or has, within the 5 years immediately prior to the day on which the Authority considers, or, where appropriate, begins to consider the matter, made a composition or scheme of arrangement with his creditors".

A voluntary arrangement does not sit in the same place in all four, and that is what separates the two routes. Cap. 159 s.26A(1)(d) and Cap. 571 s.195(1)(a)(i) name a voluntary arrangement alongside bankruptcy, as quoted above. The other two do not: Cap. 622 s.480(1) is keyed to "an undischarged bankrupt", and the words "voluntary arrangement" do not appear anywhere in Cap. 622; Cap. 159 s.6(7) triggers only "where a solicitor becomes bankrupt". So a voluntary arrangement does not engage the director prohibition and does not automatically determine a practising certificate — but it does engage the Cap. 159 s.26A intervention powers and the Cap. 571 s.195 power to revoke or suspend. Whether the "composition or scheme of arrangement" in Cap. 511 s.19(2)(a) covers a Cap. 6 voluntary arrangement is not defined in that chapter.

There is a price on the same seam. Section 30B(2)(a)(ii) makes a previous voluntary arrangement one of the situations in which the court must not grant early discharge, and it carries no time limit: a person who takes the arrangement route first and is later made bankrupt has closed off early discharge for good.

If you are the creditor

Once the order is made, s.12(1) stops your individual enforcement for a provable debt unless the court gives leave. But s.12(2) preserves a secured creditor’s power to realise the security, and s.6B allows a secured creditor to petition either by offering to give up the security for the benefit of all creditors or by petitioning on the unsecured part only. Ranking is governed by s.37 (priority of costs and charges) and s.38 (priority of debts); unsecured creditors come after the preferential debts.

That is one reason the Small Claims playbook treats a bankruptcy petition as a last resort: it costs an $11,250 deposit plus the $1,045 petition fee to start, and you recover late in the queue.

Quick reference table