PROTECTION OF WAGES ON INSOLVENCY ORDINANCE

PROTECTION OF WAGES ON INSOLVENCY ORDINANCE

LAWS OF HONG KONG

PROTECTION OF WAGES ON INSOLVENCY

ORDINANCE

CHAPTER 380





CHAPTER 380

PROTECTION OF WAGES ON INSOLVENCY ORDINANCE

ARRANGEMENT OF SECTIONS

Section.................................... Page

PART I

PRELIMINARY

1. Short title ...........................3
2. Interpretation ........................3

PART II

PROTECTION OF WAGES ON INSOLVENCY FUND BOARD

3. Establishment and incorporation of Wages on Insolvency Fund Board 4

4. Functions and powers of the Board ....5
5. Board to be subject to directions of the Governor in Council 5

PART III

FUND

6. Establishment of Protection of Wages on Insolvency Fund 5
7. Payments from the Fund ...............6

PART IV

FINANCIAL PROVISIONS

8. Financial year and estimates .........6
9. Bank account .........................6
10. Investment of moneys ................7
11. Accounts ............................7
12. Auditors ............................7
13. Statements and reports to be laid on table of Legislative Council 7
14. Costs of administering the Fund .....7

PART V

PAYMENT FROM THE FUND

15. Entitlement to apply for ex gratia payment 8
16. Payment .............................8

17. Review by............................Board ..................................................................................
..........................................10





Section.................................... Page
18. Additional power of Commissioner ....10
19. Verification of application .........11
20. Decisions under this Part not to be challenged 12

21. Power of Commissioner to delegate .......... 12

22. Payment not to affect right to legal aid 12

23. Proof by certificate
........................................................ 12

PART VI
REcovERY oF PAYmENn
24. Subrogation .........................13
25. Recovery of payment made by mistake .13

PART VII

MISCELLANEOUS

26. Offences
.................................................................... 13

27. Regulations .........................14
28. Power of Governor to amend Schedule .14

29. Transitional .................................. 14

Schedule. Protection of Wages on Insolvency Fund Board ............................. ......
15





CHAPTER 380

PROTECTION OF WAGES ON INSOLVENCY

To provide for the establishment of a board to administer the Protection of Wages
on Insolvency Fund, to provide for payment of monies from the Fund to
employees whose employers become insolvent; and for matters connected
therewith or incidental thereto.

[19 April 1985] L.N. 100 of 1985

Originally 12 of 1985 - 48 of 1987, R. Ed. 1987,41 of 1988, 38 of 1989

PART I

PRELIMINARY

1. Short title

This Ordinance may be cited as the Protection of Wages on Insolvency

Ordinance.

2. Interpretation

In this Ordinance, unless the context otherwise requires

'applicant' means any person who would, on the winding up of a company, be
entitled to priority under section 265(1)(b), (c), (ca) or (cc) of the Companies
Ordinance (Cap. 32) or who would, on a bankruptcy, be entitled to priority
under section 38(1)(b), (c), (ca) or (cc) of the Bankruptcy Ordinance (Cap. 6)
other than a person whose employer is an individual and who is a member of
the family of that employer and who dwells in the same dwelling as that
employer; (Amended 48 of 1987 s. 2; 38 of 1989 s. 2)

'bankruptcy petition' means a bankruptcy petition under the Bankruptcy
Ordinance (Cap. 6);

'Board' means the Protection of Wages on Insolvency Fund Board established by
section 3;

-Commissioner' means the Commissioner for Labour;

'company- means any body which is liable to be wound up under the Companies
Ordinance (Cap. 32);





'financial year- means the financial year of the Fund fixed under section 8;

'Fund' means the Protection of Wages on Insolvency Fund referred to in -section
6;

'levy' has the meaning assigned to it by section 2 of the Business Registration
Ordinance (Cap. 3 10);

-severance payment' means a severance payment in respect of which an applicant
would, on the winding up of a company, be entitled to priority under section
265(1)(ca) of the Companies Ordinance (Cap. 32) or would, on a bankruptcy, be
entitled to priority under section 38(1)(ca) of the Bankruptcy Ordinance(Cap.
6); (Added 38 of 1989s.2)

'wages' means wages or salary in respect of which an applicant would, on the
winding up of a company, be entitled to priority under section 265(1)(b) or (c)
of the Companies Ordinance (Cap. 32) or who would, on a bankruptcy, be
entitled to priority under section 38(1)(b) or (c) of the Bankruptcy Ordinance
(Cap. 6);

wages in lieu of notice' means wages in lieu of notice in respect of which an
applicant would, on the winding up of a company, be entitled to priority under
section 265(1)(cc) of the Companies Ordinance (Cap. 32), or would, in a
bankruptcy, be entitled to priority under section 38(1)(cc) of the Bankruptcy
Ordinance(Cap. 6); (Added 48 of 1987s. 2)

'winding-up petition- means a winding-up petition under Part V or X of the
Companies Ordinance (Cap. 32).

PART II

PROTECTION OF WAGES ON INSOLVENCY FUND
BOARD

3. Establishment and incorporation of

Wages on Insolvency Fund Board

(1) There is hereby established a board to be known as the Protection of
Wages on Insolvency Fund Board and in the Chinese language as
which shall be a body corporate.

(2) The Board shall consist of a Chairman appointed under the Schedule and
not more than 10 members appointed by the Governor as follows

(a) subject to paragraph (b) not more than 4 public officers;

(b)equal numbers of persons who, in his opinion, represent employers
and persons who, in his opinion, represent employees.

(3) The Governor shall give notice of each appointment by notice in the
Gazette.

(4) The Schedule shall have effect with respect to the Board.





4. Functions and powers of the Board

(1) The Board shall have the following functions

(a) to administer the Fund;

(b)to make recommendations to the Governor with respect to the rate of
levy; and

(c)to perform such other duties as are imposed or other powers as are
conferred on it by this Ordinance.

(2) The Board may do all such things as are necessary for, or incidental or
conducive to, the better carrying out of the functions of the Board and may in
particular, but without prejudice to the generality of the foregoing

(a)hold, acquire or lease all kinds of property whether movable or
immovable;

(b)sell or otherwise dispose of all kinds of property whether movable or
immovable;

(c)subject to section 10, invest its funds in such manner and to such
extent as it thinks necessary or expedient; and

(d)with the prior consent of the Financial Secretary, borrow money in
such manner and on such securities or terms as it thinks expedient.

5. Board to be subject to directions

of the Governor in Council

The Governor in Council may give to the Board such directions as he thinks fit
with respect to the exercise of its functions under this Ordinance and the Board
shall comply with any such direction.

PART III

FUND

6. Establishment of Protection of
Wages on Insolvency Fund

The fund known as the Protection of Wages on Insolvency Fund established
under the provisions of section 21 of the Business Registration Ordinance (Cap.
310) in force immediately before the commencement of this Ordinance shall be
deemed to be established and continue in existence under this section, and shall
consist of

(a)moneys that are paid by the Commissioner of Inland Revenue under
that section whether paid before or after the commencement of this
Ordinance;





(b) moneys recovered under Part VI;
(c)interest and other income derived from the moneys and invest-
ments comprising the Fund; and
(d) other moneys lawfully paid into the Fund.

7. Payments from the Fund

There shall be paid from the Fund the following---
(a) payments to applicants under section 16;
(b)expenses incurred by the Board for the purposes of this
Ordinance;
(c) capital, interest and charges in respect of any loan; and
(d)any other sums required or permitted to be paid by the Fund
under this Ordinance.

PART IV

FINANCIAL PROVISIONS

8. Financial year and estimates

(1) The Board may, from time to time, with the prior approval of the
Governor, fix a period to be the financial year of the Fund.
(2) In each financial year, before a date to be fixed by the Governor, the
Board shall submit to the Governor, for his approval, estimates of the income
and expenditure of the Fund for the next financial year:
Provided that the estimates for the first financial year of the Fund shall be
submitted as soon as practicable after the commencement of this Ordinance.
(3) The Governor shall consider the estimates submitted to him under
subsection (2) and may approve or reject them and, in the case of rejection, may
require the Board to resubmit the estimates modified in such manner and within
such time as the Governor may direct.
(4) The Board may, from time to time, vary the estimates approved under
subsection (3) and shall, as soon as practicable, deliver to the Governor a
statement in writing containing details of any variation.

9. Bank account

The Board shall open and maintain an account with a bank approved by
the Financial Secretary and shall pay all moneys of the Fund into that account.





10. Investment of moneys

All moneys of the Fund that are not immediately required by the Board may be

(a)deposited on fixed term or call deposit or in a savings account in any
bank licensed under the Banking Ordinance (Cap. 155); or

(b)with the prior approval of the Financial Secretary, invested in such
other investments as the Board thinks fit.

11. Accounts

The Board shall

(a)keep and maintain such accounts and records of all transactions of
the Fund as the Director of Accounting Services may require; and

(b)after the end of each financial year cause to be prepared a statement
of the accounts of the Fund which shall include an income and
expenditure account and balance sheet and shall be signed by the
Chairman.

12. Auditors

(1) The Board shall at the commencement of each financial year appoint
auditors, who shall be entitled to have access to all books of account, vouchers and
other records kept by the Board and to require such information and explanations as
they may think fit.

(2) The auditors shall audit the statement of accounts prepared under section
11 and shall report thereon to the Board.

13. Statements and reports to he laid

on table of Legislative Council

(1) The Board shall, within 6 months after the end of each financial year or such
further time as the Governor may for any particular year allow, submit to the
Governor a report on the activities of the Board for that financial year including
copies of the statement of accounts prepared under section 11 and the report made
under section 12.

(2) The Governor shall cause the reports and statements received by him under
subsection (1) to be laid on the table of the Legislative Council.

14. Costs of administering the Fund

(1) All costs and expenses incurred by the Government in administering the
Fund shall be a charge upon general revenue.





(2) The Financial Secretary may direct that a supervision fee to be determined
by him, in relation to such period as may be determined by him, shall be charged
against the income of the Fund and shall at a time determined by him be paid to him
by the Board from the Fund and paid by him into general revenue..

PART V

PAYMENT FROM THE FUND

15. Entitlement to apply for ex gratia payment

(1) Subject to this Part, an applicant to whorn

(a) wages are due and unpaid;

(b) wages in lieu of notice are due and unpaid; or

(c)the liability to be paid a severance payment has arisen and the
severance payment is unpaid, whether or not the severance payment
is then due,

may apply for an ex gratia payment from the Fund in respect of the wages, wages in
lieu of notice or the severance payment, as the case may be, or all or any of them.
(Replaced 38 of 1989 s. 3)

(2) An application under subsection (1) (in this Part called an application-) shall
be made to the Commissioner in writing in a form approvedbyhim. (Amended 48 of
1987s. 3)

(3) No applicant shall apply for payment from the Fund in respect of any
wages for services rendered before 1 April 1985.

(4) No applicant shall apply for payment from the Fund in respect of wages in
lieu of notice arising out of a contract of employment terminated before the
commencement of the Protection of Wages on Insolvency (Amendment) Ordinance
1987 (48 of1987). (Added 48 of 1987s. 3)

(5) No applicant shall apply for payment from the Fund in respect of a
severance payment the liability for payment of which arose before the
commencement of the Protection of Wages on Insolvency (Amendment) Ordinance
1989 (38 of1989). (Added 38 of1989 s.3)

16. Payment

(1) Subject to subsections (IB) and (2) where it appears to the Commissioner
that an employer has failed to pay any wages, wages in lieu of notice or severance
payment, as the case may be, or all or any of them to an applicant and that





(a) in the case of an employer who is not a company-

(i) a bankruptcy petition has been presented against him; or

(ii) he has committed an act of bankruptcy within the meaning of
section 3 of the Bankruptcy Ordinance (Cap. 6) but a petition
cannot be presented against him by reason of section 6(1)(a)
of that Ordinance; or (Replaced 41 of 1988 s. 2)

(b)in the case of an employer who is a company, a winding-up petition
has been presented against that employer,

he may make an ex gratia payment to the applicant out of the Fund of the amount of
the wages, wages in lieu of notice or severance payment, as the case may be, or all
or any of them.

(IA) When the Commissioner makes a payment under subsection (1)(a)(ii), he
shall give notice of the payment and the reasons therefor in the Gazette. (Added4]
of 1988 s. 2)

(1 B) Where an application has been made in respect of a severance payment
which is not due at the date of the application, the Commissioner may defer
consideration of the application until the severance payment becomes due. (Added
38 of 1989s.4)

(2) The Commissioner shall not make any payment under subsection (1)-

(a)to the applicant unless the applicant has verified his application by a
statutory declaration in a form approved by the Commissioner;

(b)where the employer is a company, of an amount exceeding the sum
referred to in section 265(1)(b) of the Companies Ordinance (Cap.
32);

(c)where the employer is a person other than a company, of an amount
exceeding the sum referred to in section 38(1)(b) of the Bankruptcy
Ordinance (Cap. 6);

(d)in respect of wages for services rendered more than 4 months prior to
the date of application;

(e) in respect of wages in lieu of notice-

(i) of an amount exceeding(A) the equivalent of 7 days' wages of
the applicant; or (B) $2,000, whichever is the lesser; or

(ii) subject to subsection (M), which became due more than 4
months prior to the date of application; or (Replaced 38 of
1989s.4)

(f) in respect ofa severance payment

(i) of an amount exceeding $4,000; or

(ii) the liability for payment of which arose more than 4 months

.prior to the date of application. of 1989s.4)





(2A) Subsection (2)(e)(ii) shall not apply to wages in lieu of notice arising out
of a contract of employment terminated before the commencement of the Protection
of Wages on Insolvency (Amendment) Ordinance 1989 (38 of 1989). (Added 38 of
1989 s. 4)

(3) The Legislative Council may by resolution amend the period specified in
subsection (2)(e)(i)(A) or the amount specified in subsection(2)(e)(i)(B)or(f)(i).
(Added 48 of 1987s. 4)

(Amended 48 of 1987 s. 4; 38 of 1989 s. 4)

17. Review by Board

(1) Any applicant aggrieved by any decision of the Commissioner under
section 16 may in writing--

(a) request the Commissioner to give reasons for that decision; and

(b)after being given reasons under paragraph (a), request the
Commissioner to refer the application to the Board.

(2) Upon receiving a request from an applicant under subsection (1)(b), the
Commissioner shall forward all documents relating to the application to the
Chairman of the Board.

(3) The Board may confirm or vary any decision of the Commissioner on an
application referred to it under this section or may for those purposes require the
Commissioner to make further inquiries relating to the application.

18. Additional power of Commissioner

(1) Notwithstanding that in any particular case a petition referred to in section
l6(1)(a)(i) or (b) has not been presented against an employer, the Commissioner may,
subject to subsection (2) of that section, make an ex gratia payment under that
section in that case if in his opinion- (Amended4] of 1988s.3)

(a) the employer employs less than 20 employees;

(b)sufficient evidence exists to support the presentation of a petition in
that case on the ground

(i) if the employer is a company, that he is unable to pay his debts;
or

(ii) if the employer is a person other than a company, that he has
committed an act of bankruptcy; and

(e)it is unreasonable or uneconomic to present a petition in that case.

(2) Where the Commissioner exercises his discretion under subsection (1) to
make payment, he shall give notice in the Gazette stating that, in his opinion,





sufficient evidence exists to support the presentation of a petition on the

ground- (a) if the employer is a company, that he is unable to pay his debts; or
(b) if the employer is a person other than a company, that he has
committed an act of bankruptcy.
(3) Nothing in subsection (2) shall require the Commissioner to give more
than one notice in respect of each employer.
(4) No action shall lie against the Commissioner in respect of any notice
given under subsection (2).

19. Verification of application

(1) For the purpose of verifying any application under section 15, or if so
required by the Board under section 17(3), the Commissioner may make such
inquiries as he thinks fit and may in particular, but without limiting the
generality of the foregoing and without prejudice to any powers of the
Commissioner under any other Ordinance-
(a) interview the applicant and any other employee;
(b)by notice in writing require the applicant or any other person
having possession thereof to produce to the Commissioner for his
inspection any record, book of account, or other document as
may, in the opinion of the Commissioner, be necessary to verify
the application;
(c)by notice in writing require any person whom he reasonably
believes to have possession thereof to produce to the Com-
missioner for his inspection any register, record or other
document required to be kept by an employer under the
Employment Ordinance (Cap. 57); and
(d)by notice in writing require the employer to whom the
application relates or any servant, agent or employee of that
employer to attend before him and to answer questions put by
him.
(2) Any notice served by the Commissioner imposing any requirement
under this section, shall state the time when and place where the person to
whom the notice is given shall comply with that requirement.
(3) Any notice to be served on any person under this section may be
served by post.
(4) In relation to the Commissioner's powers under subsection (1) to
make inquiries-
(a)any person required to answer questions shall have, in relation to
any answer thereto, such privileges as he would have had, had
such question been asked in a court but shall otherwise answer
any such question;





(b)the Commissioner shall proceed as informally as possible and may
determine the procedure to be followed.

20. Decisions under this Part not to he challenged

No decision of the Commissioner or the Board made in exercise of any
discretion under this Part shall be challenged in any Court.

21. Power of Commissioner to delegate

(1) The Commissioner may, in writing, authorize any officer of the Labour
Department to exercise any of his powers or perform any of his duties under this
Part.

(2) In this Part but not in subsection (1) 'Commissioner' includes any person
authorized by the Commissioner under this section.

22. Payment not to affect right to legal aid

Any right of an applicant to receive legal aid under the Legal Aid Ordinance
(Cap. 91) shall not be affected by any payment made under section 16 if the purpose
of such legal aid is to assist the applicant to recover any further amount due to him
under any contract of employment or under the Employment Ordinance (Cap. 57).

23. Proof by certificate

(1) A document purporting to be under the hand of the Commissioner stating
that

(a)on the date specified therein the sum of money stated therein was
paid from the Fund to the person named therein; and

(b)immediately before that date the employer named therein owed to
that person the amount of wages, wages in lieu of notice or
severance payment, as the case may be, or all or any of them,
specified therein in respect of the period or periods stated therein,
(Replaced 38 of 1989 s. 5)

shall be admissible in any proceedings on its production and without further proof
and, until the contrary is proved or unless it be shown that the document was not
under the hand of the Commissioner, shall be prima facie evidence of the facts
stated therein. (Replaced 48 of 1987 s. 5)

(2) In this section 'proceedings' includes the lodging of a proof of debt in any
bankruptcy or winding-up.





PART VI

REcovERY OF PAYMENTS

24. Subrogation

(1) Where a payment is made under section 16 to an applicant in respect of
wages due to him, or in respect of any liability to pay him a severance payment,
whether or not the severance payment is due when that payment under section 16 is
made, all his rights and remedies with respect to those wages or severance payment,
as the case may be, existing immediately before that payment under section 16 shall,
to the extent of the amount of that payment under section 16, be transferred to and
vest in the Board for the benefit of the Fund and the Board may take such steps as it
considers necessary to enforce those rights and remedies.

(2) Where the amount of any wages due to an applicant, or the amount of any
liability in respect of the payment to him of a severance payment, exceeds the
amount of any payment made to him under section 16 in respect of those wages or
severance payment, as the case may be, nothing in this section shall affect the
rights or remedies of the applicant in respect of the amount of the excess.

(3) In this section---wages-includes wages in lieu of notice. (Added48of 1987 s.
6)

(Amended 38 of 1989 s. 6)

25. Recovery of payment made by mistake

Where

(a)any payment is made to any person from the Fund under a mistake of
law or fact; or

(b)notwithstanding that no person has been -charged with or convicted
of an offence under section 26, any payment is made to any person, in
respect of an application that is false in any material particular,

such payment shall be recoverable by the Board from the recipient thereof as a debt
due to the Board.

PART VII

MISCELLANEOUS

26. Offences
(1) Any person who-





(a)in providing information for the purposes of this Ordinance including
any inquiry thereunder, makes any statement which he knows to be
false in a material particular or recklessly makes a statement which is
false in a material particular; or

(b)for the purposes of this Ordinance including any inquiry thereunder
and with intent to deceive, produces, supplies or sends, or otherwise
makes use of, any document or record which is false in a material
particular,

commits an offence and is liable to a fine of $50,000 and to imprisonment for 3
months.

(2) Any person who, without reasonable excuse, fails to comply with any
requirement imposed by the Commissioner under section 19(1) or (4) commits an
offence and is liable to a fine of $5,000 and to imprisonment for 1 month.

(3) Without prejudice to any Ordinance relating to the prosecution of offences
or to the powers of the Attorney General in respect of the prosecution of criminal
offences, a prosecution for any offence under this Ordinance may be brought in the
name of the Commissioner and commenced and conducted by an officer of the
Labour Department authorized in that behalf in writing by the Commissioner.

(4) Where a complaint is made or an information laid for an offence under this
Ordinance by the Commissioner or any officer authorized under subsection (3), the
complainant or informant shall, for the purposes of section 8(1B) of the Magistrates
Ordinance (Cap. 227), be deemed to be acting on behalf of the Attorney General.

27. Regulations

The Governor in Council may by regulations

(a)prescribe anything required or permitted to be prescribed under this
Ordinance;

(b)provide for the better carrying into effect of the provisions of this
Ordinance.

28. Power of Governor to amend Schedule

The Governor may by notice in the Gazette amend the Schedule.

29. Transitional

The Protection of Wages on Insolvency (Amendment) Ordinance 1987 (48 of
1987) ('the amending Ordinance') shall apply to and in relation to any payment to
be made in accordance with section 38 of the Bankruptcy Ordinance (Cap. 6), or
section 265 of the Companies Ordinance (Cap. 32), after





the commencement of the amending Ordinance, notwithstanding that any debt to
which such payment relates was incurred before that commencement.

(Incorporated 48 of 1987s. 9)

SCHEDULE [ss. 3 &
28]

PROTECTION OF WAGES ON INSOLVENcy FuND
BOARD

1 Status of Board

The Board shall not be the servant or agent of the Crown nor shall it enjoy any status,
immunity or privilege of the Crown.

2. Seal

(1) The Board shall have a common seal, the affixing of which shall be authenticated by the
signature of any 2 members.

(2) Any document purporting to be a document duly executed under the seal of the Board
shall be received in evidence and shall, unless the contrary is proved, be deemed to be a
document so executed.

3. Tenure of members

(1) A member of the Board who is not a public officer shall, unless his appointment is
terminated or otherwise ceases, hold office for such period as the Governor may specify.

(2) On the expiry of his period of appointment or re-appointment, any member to whom
subparagraph (1) applies shall be eligible for re-appointment for such further term as the
Governor may specify.

(3) Any member to whom subparagraph (1) applies may at any time resign from office by
giving notice in writing to the Governor, and he shall cease to be a member from the date
specified in the notice or, if no date is specified, from the date ofthe receipt by the Governor
ofthe notice.

(4) If any member of the Board, other than the Chairman, is absent from Hong Kong or is
for any other reason unable to exercise the powers or perform the duties of his office as
member, the Governor may appoint another person to be a temporary member in his place
during his absence or incapacity.

4. Chairman

(1) The Governor shall appoint a person to be Chairman ofthe Board and shall give notice
of such appointment by notice in the Gazette.

(2) If the Chairman is absent from Hong Kong or is for any other reason unable to act as
Chairman, the Governor may appoint another person to be Chairman in his place during his
absence or incapacity and shall give notice of such appointment by notice in the Gazette.

(3) At any meeting of the Board the Chairman shall have a casting vote in addition to a
deliberative vote.

5. Meetings and proceedings of the
Board

(1) Meetings of the Board shall be held at such times and places as the Chairman or person
acting as Chairman may appoint.

(2) The quorum for meetings of the Board shall be 5.

(3) Subject to this Schedule the Board may determine its own procedure.











6. Transaction of business by circulation of
papers

The Board may transact any of its business by the circulation of papers, and a resolution in
writing which is approved by a majority of the members shall be valid and effectual as if it had
been passed at a meeting of the Board by the votes of its members so approving the resolution.

7. Board may delegate to
Commissioner

The Board may by resolution, with or without restrictions or conditions as it thinks fit,
delegate in writing to the Commissioner any of its powers and duties other than its power under
section 4(1)(b) or 17(3).

8. Committees

The Board may create and appoint such committees for any general or special purposes as
it thinks fit and, in relation to such commnittees

(a) the Chairman shall be appointed by the Board; and

(b)the Chairman and at least 2 out of every 3 persons appointed to a committee shall
be members of the Board.

9. Board may delegate to
Committee

The Board may by resolution, with or without restrictions or conditions as it thinks fit,
delegate in writing to any committee appointed under paragraph 8 any of its powers and duties
other than its power under section 4(1)(b) or 17(3).

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