1.1 Amicable Phase
Accounts Receivable Hong Kong employs a large and professional debt collection staff in Hong Kong. The island, though technically a part of the People’s Republic of China, does not have the same prohibition on debt collection acts as mainland China currently enforces. That permits Accounts Receivable Hong Kong to forego an immediate pursuit of legal action via specialized law firms, instead proceeding with a more traditional debt collection process.
It should be noted that Hong Kong is a large and influential city in Asia, and contains a very high number of international company headquarters and global conglomerates. The city’s cosmopolitan nature makes it one of the most international cities in the world, with residents from many countries residing on the island. Our professional team of collection agents are skilled in the kind of research that can determine a company’s origins, and the laws to which it is held, during the entirety of the debt collection process.
Hong Kong’s international nature can be seen in its languages. Long a British protectorate, the official legal languages of Hong Kong are both Chinese and English. Cantonese is the most widely spoken language in the city of Hong Kong; traditional Chinese is the most comment written form of the language. In Hong Kong, Accounts Receivable produces all of its written communications with clients and debtors in English.
Because the island of Hong Kong is relatively small, if densely populated, Accounts Receivable Hong Kong, our professional collection agents are able to visit debtors in person in an attempt to settle any outstanding balances in amicable fashion. This is done only if the situation demands an in-person visit, or if such a visit is deemed more potentially effective.
It should be noted that charging interest on debts is not common in Hong Kong, as this practice typically forces debtors to withhold payment in favor of a better arrangement or outcome.
1.1.2 Local agent
Accounts Receivable Hong Kong is permitted by local laws to use a local agent or LDC to trace the current whereabouts and financial situation of the debtor. That local agent will make an in-person site visit to debtors in Hong Kong if the situation warrants such an action.
During the discovery phase of the amicable process. Accounts Receivable Hong Kong will use a trace report to identify any information about the debtor. This report typically contains information about the debtor’s current number of staff at their headquarters, as well as varied financial information. In addition to this trace report, our ability to hire an LDC in Hong Kong allows us to better pursue debts and collect the balances owed to debtors.
Hong Kong does not currently have any laws that prohibit charging interest to debtors. For this reason, the assignment of interest to debtors is freely negotiable between the debtor and our client. It should be noted, however, that interest rates are far easier to assign and enforce when they’re agreed to as part of the creditor’s original contract with the debtor.
1.1.4 Debt collection costs
Unlike in many other countries, the costs associated with collecting a debt are not able to be charged to the debtor by default. Instead, the ability to pass on such charges to the debtor must be written into a contract obtained by a judgment from one of Hong Kong’s courts.
The statute of limitations in Hong Kong currently stands at seven years. This period beings at the last payment made before the debt was defaulted on or before a consumer made a late payment on the debt.
1.1.6 Accepted and most common payment methods
In Hong Kong, as in most countries around the world, the most common form of payment when collecting a debt is a payment made via cheque. In a small number of cases, consumers or companies pay off these debts via an electronic bank transfer instead.
1.1.7 Types of companies
Hong Kong’s companies are typically divided into three different types based on their size and their available capital.
The owner of a sole proprietorship typically bears unlimited liability for the business’ debts as well as any private funds.
There are no minimum capital requirements when establishing a partnership. Additionally, each partner within the partnership has unlimited liability for the company’s debts and assets. Non-businesses or those groups in engaged in non-business activities are most likely to form a business as a partnership.
Limited liability company:
This type of company is typically founded by entrepreneur and comes with a minimum capital requirement of just HK$2. The liability of the company’s debts and assets is limited to the total amount of the company’s capital.
1.1.8 Sources of information
Hong Kong’s privacy laws are a bit more extensive than those in mainland china. For this reason, only the company’s registration information is made available to the public. Any relevant financial statements that might help collect the debt are unavailable.
For more complete financial information, Accounts Receivable Hong Kong must enlist the support of a credit information agency. They’ll provide a more complete financial picture of the company’s assets, debts, and other financial information, gathered from their own sources during an interview with the company’s executives or partners. Of course, this also means that the accuracy of their report cannot necessarily be verified or guaranteed by Accounts Receivable Hong Kong.
1.2 Retention of Title
In Hong Kong, it is not very common to use Retention of Title, or ROT, especially when interacting to business of medium or smaller size. The difficulty of using Return of Title in collections proceedings is that ROT must be specified in the original contract between a debtor and the creditor. If not, it is virtually impossible to enforce.
1.3 Legal Procedures
The legal system in Hong Kong is based on the Common Law system that has been put into place in the United Kingdom. This legal system is a relic from Hong Kong’s time as a British colony, and it makes legal proceedings much more straightforward than in mainland China.
The legal system is typically only invoked by Accounts Receivable Hong Kong if the amicable collection phase has proven fruitless. At that time, our professional collections agents will make an evaluation of the situation in order to determine whether legal action would be recommended, successful, and cost-effective, for each of our clients on a case-by-case basis.
The good news for our clients is that legal action is considered an effective way to pursue the collection of debts in Hong Kong. Beyond that, it’s also considered one of the most inexpensive ways to complete the collection of a debt.
We employ a solicitor in Hong Kong who, upon receipt of the case, will serve letters of legal demand to debtor. The solicitor will also contact the debtor to determine whether or not the debt can be settled or satisfied without the full pursuit of legal action. If the debt cannot be satisfied outside of a lawsuit, the solicitor will proceed with legal proceedings against the debtor through Hong Kong’s system of courts.
1.3.2 Legal System
The judicial system in Hong Kong contains three distinct courts. The first is the Small Claims Tribunal, which handles small claim matters and small financial cases. The second is the District Court, which handles larger cases and matters of appeal. Finally, the High Court of Hong Kong handles much larger cases with wide-ranging legal questions.
Small Claims Tribunal:
The goal of the Small Claims Tribunal is to handle relatively small matters in a quick and efficient way. The approach of this lower-level judicial system is to handle matters more informally and inexpensively than they would be handled by the higher-level District Court system on the island. To that end, the Tribunal handles claims that range in size from HK$1 to a maximum of HK$50,000. The rules and procedures of the Tribunal are less strict than in other courts, and no legal representation is permitted for either the debtor or the creditor in the case. An initial filing fee of HK$120 may be charged based on the amount of the claim being disputed.
The District Court system in Hong Kong has jurisdiction over much more significant financial claims, including those from HK$51,000 through a maximum of HK$1,000,000.
This high-level court deals with far larger legal matters in Hong Kong, and is additionally charged with handling those cases with a claim greater than HK$1,000,000.
By law, the country’s Small Claims Tribunals do not permit any third party, including legal representatives like solicitors, to be a part of the proceedings. Both parties in these cases attend the hearing themselves. The higher courts in Hong Kong do allow representation. Those cases are initiated using a Writ of Summons to the debtor, who then has fourteen days to file a defense. They are also required to file a notarized Statement of Claims.
If a defendant files a defense and requests a payment plan due to financial hardship, the claimant has a full two weeks to reply. If both parties find it impossible to enter into such an agreement, hearings will begin when called for by the judge, and a judgment will often be granted.
If a defendant does to respond to the Writ of Summons at all before the deadline has passed, the claimant is entitled to apply for a default judgment against the debtor. A debtor can file an objection to this default judgment, however. With a satisfactory explanation of their absence, a court may allow a reactivation of the initial procedures and set aside the default judgment in favor of a new ruling.
As of January 1, 2010, Hong Kong issued a new Practice Direction on mediation. This new regulation applies to any civil proceedings in the Court of First Instance as well as the country’s District Court system. It declares mediation a voluntary process that involves a trained and impartial third party mediator. That mediator helps meet both parties’ needs during the dispute, in order to reach an amicable agreement for repayment of the debt. In general, debtors and creditors are strongly urged to pursue this process before resorting to legal action.
If a judgment is obtained in favor of the claimant, Accounts Receivable Hong Kong will evaluate possibilities for enforcement most favorable to our client.
1.3.3 Required documentation
The legal procedures in Hong Kong require a number of important documents before we can proceed. Those include:
- Copies of the payment contract
- Account statements
- Debt-related correspondence
1.3.4 Interests and costs in the legal phase
Any legal costs associated with the legal phase of the process, as well as any relevant interest amounts, can be charged to the defendant in the case. It should be noted that these charges are subject to the judgment handed down by the judge.
1.4.1 Enforcement of the debt
In Hong Kong, enforcement typically includes the following:
Writ of Fieri Facias:
Bailiffs are appointed to visit the debtor’s location and seize the debtor’s goods for sale in order to cover the outstanding balance. If a third party owns the goods, they can file an action claiming ownership before the goods are sold as part of payment.
An interview is conducted with the director of the company charged with the debt in the interest of obtaining more information about the debtor’s financial situation.
Funds are seized from the debtor’s bank account to cover the outstanding balance. This can become complicated, however, as Accounts Receivable Hong Kong must prove that the bank account has sufficient funds to cover the balance beforehand.
If it is suspected that the debtor may leave Hong Kong, a Prohibition Order can be filed with the court. This prevents the debtor from leaving the country, and immigration officers will detain them once it is verified that they intend to leave Hong Kong. Sufficient evidence does need to be provided the court and, because this can be viewed as counter to the Law of Human Rights, it is extremely difficult to obtain this order.
This process seeks to bankrupt the original debtor, and it can be exceedingly costly. It is important to evaluate the chance of obtaining a dividend before fulfilling the costs associated with these proceedings.
1.4.2 Expected timeframe
Proceedings generally take between one and two months to complete.
1.5 Insolvency Proceedings
1.5.1 General information
There is no bankruptcy protection in Hong Kong, and only one type of insolvency proceeding for debtors.
1.6 Arbitration and Mediation
In Hong Kong, neither mediation nor arbitration are very common. Typically, only the largest companies in the country stipulate the use of these services in their contracts.To get started today, call us at321-710-3530 to speak with an associate