(a) In relation to each type of insolvency procedure available in the legal system of this economy, what powers are given to, or duties imposed upon, each type of administrator to investigate, discover and report to a Court or to regulatory authorities of the government any breaches of the law by former management of the corporate debtor?

As one of the primary responsibilities of the liquidator is to collect in all the company's property, the liquidator is bound to take steps to ensure that any of the company's assets that are or have been in the hands of the management are given over to the liquidator. Misfeasance proceedings (Section 276) may be brought against a director who has dealt with funds in breach of duty. The Sub-Committee recommends that provisional liquidators should also be able to take action under this section. Consultation Paper on the Winding Up Provisions of the Companies Ordinance, supra, para 17.40 at 138.

With reference to criminal liability, Section 277(1) of the Companies Ordinance provides that if, in the course of a winding up by the court, it appears that any director has committed a criminal offence then the liquidator may be directed to refer the matter to the Secretary for Justice. A similar obligation is imposed in Section 277(2)) upon a liquidator in a voluntary liquidation. The Sub-Committee on Insolvency noted the 'need for a general reconsideration of how dishonesty on the part of company directors might be addressed more effectively' (id, para 17.48 at 139). The Consultation Paper suggests that 'the reporting of crime should attract a higher priority than appears to be the case at present' (id, para 17.49 at 139) and recommends that a code of conduct be drawn up to guide insolvency practitioners in relation to the reporting of crime. It also proposes that suspected crimes should be initially reported to the Official Receiver as the regulator of the Administrative Panel so that the Prosecutions and Director Disqualification Section in the Official Receiver's Office could decide whether to advise the liquidator to report the matter to the Secretary of Justice or whether to report the matter itself to the Secretary for Justice or the police. Id, para 17.54 at 140.

In addition, the Official Receiver's Office has delegated authority from the Secretary for Justice to take prosecutions before a magistrate in regard to various offences under the Companies Ordinance (see id, para 17.1 at 130) including the sections listed in the discussion of penal sections in the Companies Ordinance discussed in Section I1(c) above. However, prosecutions are infrequent under many of these sections, and convictions even rarer: for example, over the four years from 1993/94 to 1996/97 there were no prosecutions under Sections 271 to 276, with the exception of cases under Section 274 for not keeping proper books of account. Id, para 17.17 at 134. Prosecutions under Section 274 are more likely than under other sections because problems regarding the keeping of accounts are fairly easily detected through the requirement that a statement of affairs must be submitted - if there are no accounts available to complete a statement, the prosecutions section of the Official Receiver's Office will be notified. Id, para 17.23 at 135.

Section 274 is closely related to Section 121, which provides for the keeping of books of account at all times. The Official Receiver's recorded combined prosecutions under these two sections through 1994/95. For the two-year period from 1993/94 through 1994/95, 84 summonses were issued under these sections, 67 convictions were achieved, and average fines of HK$8,900 were levied. Id, para 17.17 at 134. When the data for the two sections were separated out in 1995/96, there were 25 summary convictions under Section 274, and in 1996/97, 13. Id, para 17.18 at 134. However, over this two-year period both the conviction rate and the amount of the fines decreased. Id, para 17.19 at 134.

It should also be noted that, pursuant to Section 168I(3), either (i) a liquidator of an insolvent company or (ii) a receiver of a company shall report to the Official Receiver any matters which suggest that a director (or shadow director or former director) has been responsible for such conduct as makes him unfit to be concerned in the management of a company. Such conduct would obviously include, but not be limited to, criminal activities on the part of the management.

(b) What methods are available to each type of administrator to exercise such powers or discharge such duties? (for example examinations of directors, powers to inspect books and records, obligations to report to government authorities.)

As noted in Section J3 above, where a company goes into liquidation the liquidator will gain control of the company's books, records and documents. Proceedings can be taken against any director or other person who refuses to hand over such records. A liquidator may also summon the company's management to a private examination and require them to provide, in addition to a statement as to the company's affairs, other information about the company management and dealings as the liquidator may reasonably require so as to assist the liquidator in carrying out his functions. See Sections 221 (compulsory winding up) and 255 (voluntary winding up). The public examination of a director may also be ordered, provided the Official Receiver has made a report stating that in his opinion either (a) fraud has been committed by the management or (b) a prima facie case exists that the directors are unfit to be concerned in the management of a company and should be disqualified. (See Sections 222 (compulsory winding up) and 255 (voluntary winding up).

In Hong Kong, China receivers do not have the investigative powers that the Companies Ordinance confers upon liquidators.