People walk across a footbridge that leads to government offices in Hong Kong on March 2, 2020. (ISAAC LAWRENCE / AFP)

HONG KONG - Hong Kong plans to introduce its version of US-style “Chapter 11” bankruptcy provisions, a senior government official said, as the city’s worst economic predicament in decades threatens the viability of many companies.

Hong Kong does not have a formal corporate rescue framework, unlike most other major financial centers including fierce rival Singapore, after previous attempts to introduce one met with resistance from lawmakers and labor representatives who were worried plans did not offer enough protection for workers.

Such a system would give struggling companies in Hong Kong a window to restructure their debt while being protected from the threat of legal action by their creditors

Such a system would give struggling companies a window to restructure their debt while being protected from the threat of legal action by their creditors.

James Lau, Hong Kong’s Secretary for Financial Services and the Treasury, intends to propose a bill setting out the new arrangements early in 2021, he told Reuters in an interview.

“So far, in soft sounding out, the opposition has not been that strong,” said Lau.

“With the employment picture worsening ... they can see that if things do not go well, just by insisting on their rights (they) are not getting anywhere.”

Hong Kong’s businesses are reeling from the combined effects of the US-China trade dispute, several months of anti-government protests stemming from the extradition bill incident and now the economic impact of the fast-spreading coronavirus.

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He added that the current options for embattled Hong Kong companies looking to restructure were limited.

The government hoped to introduce the bill in the next session of the Legislative Council, after elections in September, Lau said.

Confluence of events

Lau also said that Hong Kong’s current economic situation was worse than previous crises such as the SARS epidemic in 2003, and the global financial crisis in 2008.

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“It is worse than SARS, for example, which was mainly a health issue, and then there was 2008, but now you have the cumulative impact of easy money and asset price inflation,” he said.

Hong Kong’s budget, announced last month, included around HK$120 billion (US$15.44 billion) in relief measures to cushion the blow from anti-government protests and help support health authorities, small and medium-sized firms and low-income residents hit by the coronavirus.