HK To Introduce “Chapter 11” Type Bankruptcy Legislation reports that Donald Tsang HK’s Chief Executive has said that the Hong Kong government intends to introduce new legislation as a result of the financial crisis so that it can save companies with short-term financial difficulties from going bankrupt,

Forbes reports:

The crisis has highlighted the need to introduce a procedure, such as the United States’ Chapter 11, to support companies that might have short-term funding difficulties but were still viable longer-term, Tsang said.

The article goes on to report:

At the moment the only procedure is for those companies to go bankrupt,’ Tsang told journalists. ‘I believe this is a golden opportunity to prevent unnecessary bankruptcies in Hong Kong.’

The government plans to issue a consultation paper on broadening legislation to include a corporate rescue procedure, he said. But it is a medium-term measure that could take a year and so will not help companies already in difficulty.

As Hong Kong is mired in recession, bankruptcies hit a five-year high in December. Over the border in southern China, thousands of manufacturing companies, many of them Hong Kong-owned, are facing financial problems, or have had to close, as they have been hit by weakening demand for Chinese goods and find it hard to get bank credit.

Earlier this decade, Hong Kong considered introducing corporate rescue legislation but it was dropped amid a lack of support, Tsang said.

More than 10,000 jobs have been lost in the territory since the credit crisis hit last September and unemployment, now at 4.1 percent, would rise further this year, Tsang said.