TRANSFER OF BUSINESSES (PROTECTION OF CREDITORS) ORDINANCE

TRANSFER OF BUSINESSES (PROTECTION OF CREDITORS) ORDINANCE (CHAPTER 49) Whole document: To protect creditors on the transfer of businesses, to provide for the liability of transferees of business, the manner in which such liability may be avoided and for matters incidental thereto and connected therewith, and to repeal the Fraudulent Transfers of Businesses Ordinance.

[27 June 1980] 1. Short title This Ordinance may be cited as the Transfer of Businesses (Protection of Creditors) Ordinance.

2. Interpretation (1) In this Ordinance, unless the context otherwise requires- "appeal" includes a motion for a new trial or to set aside a verdict, finding or judgment; "business" means a business, or any part thereof, consisting of a trade or occupation (other than a profession) whether or not it is carried on with a view to profit; "charge" means- (a) a debenture within the meaning of the Companies Ordinance (Cap. 32); (b) a mortgage; (c) a bill of sale; (d) a lien; or (e) any document, under or pursuant to which a business or any assets thereof are charged as security for the payment of money or the performance of an obligation, and includes an equitable charge; "charge-holder" means a person who, under or pursuant to a charge, and for the purpose of enforcing payment of any money or for the performance of any obligation, may sell any business; "date of transfer" means the date on which a transfer takes effect or is intended to take effect; "notice of transfer" means a notice of transfer in accordance with section 5; "registered charge" means a charge which is registered under- (a) the Land Registration Ordinance (Cap. 128); (b) the Companies Ordinance (Cap. 32); (c) the Bills of Sale Ordinance (Cap. 20); or (d) any other enactment; "transfer" means the transfer or sale of a business, but does not include- (a) the sale of the stock-in-trade of a business in the ordinary course of its trade; (b) the creation of a charge; (c) the transfer of land or any share or interest therein; or (d) the transfer of a vessel (or the transfer of any interest or share therein), other than- (i) a vessel to which Part IV of the Shipping and Port Control Ordinance (Cap. 313) applies; or (ii) a trawler to which Part XII of the Merchant Shipping Ordinance (Cap.

281) applies; "transferee" means the person to whom a business is transferred by a transferor; "transferor" means- (a) in the case of the sale of a business under or pursuant to a charge, the person whose business has been or is intended to be sold; (b) in every other case, the person by whom or on whose behalf the transfer has been or is intended to be made.

(2) For the purposes of this Ordinance "transferor" and "transferee" respectively include a sub-transferor and a sub-transferee.

3. Transferee of business to be liable for liabilities of trans- feror (1) Subject to this Ordinance, whenever any business is transferred, with or without the goodwill thereof, the transferee shall, notwithstanding any agreement to the contrary, become liable for all the debts and obligations, including liability for tax charged or chargeable under the Inland Revenue Ordinance (Cap. 112), arising out of the carrying on of the business by the transferor.

(2) Notwithstanding subsection (1), where a part of a business is transferred (other than the goodwill thereof) and in any proceedings- (a) the transferee would, but for this subsection, be adjudged liable under this Ordinance for any debts and obligations arising out of the carrying on of the business by the transferor; and (b) it is shown to the satisfaction of the court hearing the proceedings that- (i) the transferee purchased such part of the business in good faith and for value; and (ii) at the date of transfer of such part of the business, the transferee had no knowledge (whether actual, constructive or imputed) that what he was acquiring formed part of a business, the transferee shall not be liable under this Ordinance for the debts and obligations arising out of the carrying on of the business by the transferor.

4. Circumstances in which the transferee's liability ceases (1) A transferee shall not become liable under section 3 if a notice of transfer has been given not more than 4 months, and not less than 1 month, before the date of transfer and has become complete at the date of transfer.

(2) Where a notice of transfer has been given but the notice has not become complete at the date of transfer, the liability of the transferee under section 3 shall cease with effect from the date on which the notice of transfer becomes complete.

(3) Where a notice of transfer has not been given before or at the date of transfer, the liability of the transferee under section 3 shall cease with effect from the date on which a notice of transfer, which is given after the date of transfer, becomes complete.

(4) A notice of transfer shall, subject to subsections (5) and (6), become complete upon the expiration of 1 month after the date of the last publication of the notice in accordance with section 5.

(5) Subject to subsection (6), in the case of a notice of transfer referred to- (a) in subsection (1), if proceedings are instituted against the transferor in respect of any liability of the transferor arising before such notice has become complete and out of the carrying on of his business; or (b) in subsection (2) or (3), if proceedings are instituted against the transferee in respect of any liability of the transferee under section 3 arising before such notice becomes complete, the notice of transfer shall (for the purposes of such proceedings only) be deemed incomplete pending the final determination of such proceedings, including all possible appeals, and pending the expiration of all periods during which such appeals may be brought.

(6) Where proceedings are instituted, a notice of transfer shall not be deemed incomplete under subsection (5) unless within 1 month of the proceedings being instituted- (a) they are served on the transferor or transferee, as the case may be; or (b) written notice that they have been instituted is sent by registered post to the last known address of such transferor or transferee.

5. Contents of notice of transfer and manner of giving notice (1) Except in the case of a transfer by way of sale under or pursuant to a charge, a notice of transfer shall contain the following particulars- (a) the full name and address of the transferor; (b) the nature of the business and the name or style under which, and the full address at which, it has been carried on during the period of 6 months immediately preceding the date of transfer; (c) the date of transfer; (d) the full name and the residential and business addresses of the transferee; (e) if the transferee- (i) intends to carry on or is carrying on the business, the full address where, and the name and style under which, he is carrying it on or intends to carry it on; or (ii) is not carrying on the business and does not intend to carry it on, a statement to that effect; and (f) a statement that at the expiration of 1 month after the date of the last publication of the notice pursuant to subsection (3), the liability of the transferee for all the debts and obligations arising out of the carrying on of the business by the transferor shall cease by virtue of this Ordinance unless proceedings are instituted prior to such expiration.

(2) In the case of a transfer by way of sale under or pursuant to a charge, a notice of transfer shall contain the following particulars- (a) the nature of the business, and the name or style under which, and the full address at which, it has been carried on during the period of 3 months immediately preceding the date of transfer; (b) the full name and address of the person whose business has been, or is intended to be, transferred by way of sale under or pursuant to the charge; (c) details of the charge under or pursuant to which the transfer by way of sale has been or is to be made, sufficient to enable any document creating or evidencing the charge to be readily identified and, without limiting the generality of the foregoing, such details shall include- (i) the date when the charge was made, given, executed or came into existence; (ii) the consideration for which the charge was executed, made or given or, if there was no such consideration, the circumstances in which it came into existence; (iii) in the case of a registered charge, the date of the registration of the charge, the title of any enactment under which it was registered and any number or other means of identifying the charge assigned to it upon registration; (d) the date of transfer; and (e) the amount of money, payment of which has been secured by the charge and which was owing- (i) at the date of the publication of the notice of transfer; or (ii) if the transfer has already taken effect, at the date of the transfer so taking effect.

(3) Every notice of transfer shall be signed- (a) by both the transferor and the transferee, in the case of a transfer to which subsection (1) applies; or (b) by the charge-holder and the transferee, in the case of a transfer to which subsection (2) applies, and shall be given by publication in- (i) the Gazette; (ii) any 2 of such Chinese language newspapers circulating in Hong Kong as may be approved for the purpose by the Chief Secretary; and (Amended L. N.

67 of 1985; L. N. 242 of 1989) (iii) 1 English language newspaper circulating in Hong Kong which has been so approved.

6. Right of transferee to indemnity (1) The transferee shall be entitled to be indemnified- (a) by the transferor, except in the case of a transfer by way of sale under or pursuant to a charge; or (b) by the charge-holder, if the transfer is by way of sale under or pursuant to a charge, for all amounts for which the transferee is made liable under this Ordinance and for which he would not otherwise be liable.

(2) The amount of such an indemnity may be recovered by civil proceedings as a debt or liquidated demand.

7. Liability of parties not affected Nothing in this Ordinance shall relieve or be deemed to relieve a transferor or transferee, or any person who sells a business under or pursuant to a charge, from any liability to which he would otherwise be subject.

8. Limitation of liability of transferee (1) A transferee who in good faith and without preference has paid in discharge or partial discharge of any liability for which he became liable under this Ordinance, and for which he would not otherwise have been liable, an amount which is equal to the value of the business acquired by him, at the date on which the transfer took effect, shall not be liable further under this Ordinance.

(2) The value of a business acquired by a transferee at the date on which the transfer takes effect shall, until the contrary is proved, be presumed to be an amount equal to the amount paid or agreed to be paid (whether in terms of money or by means of any other consideration) for the acquisition of the business.

9. Limitation of time for institution of proceedings Subject to section 6, no action shall be instituted to recover any debt from or to enforce any obligation against any person liable therefor under this Ordinance, and for which he would not otherwise have been liable, more than 1 year after the date on which the transfer in respect of which the liability arose took effect.

10. Saving This Ordinance shall not apply to any transferee where the transfer is effected- (a) by the Official Receiver or a trustee in bankruptcy; (b) by the liquidator of a company in liquidation other than voluntary liquidation; (c) by the Financial Secretary Incorporated; (Amended L. N. 369 of 1989) (d) by the Director of Education Incorporated; (e) by the Director of Social Welfare Incorporated; (f) by a person selling under or pursuant to a charge which has been registered for not less than 1 year at the date when the transfer takes effect; (g) pursuant to any order or direction of any court; (h) by an executor or administrator; or (i) by operation of law.

11. Repeal and saving (1) The Fraudulent Transfers of Businesses Ordinance (Cap. 49, 1964 Ed.) is repealed.

(2) Notwithstanding subsection (1), the Fraudulent Transfers of Businesses Ordinance (Cap. 49, 1964 Ed. ) shall continue to apply with respect to a transfer- (a) which took effect; and (b) in respect of which notice was given under section 3 of that Ordinance, before the coming into operation of this Ordinance, as if this Ordinance had not been passed.