HMRC—Q2 2023 Update: The Number of New Debts at Record Levels
Oct 16, 2023
by Sushil Patel

Wed, Feb 19, 2020
Over two months since the first cases of Coronavirus Disease 2019 (COVID-19) were identified in China’s Hubei province, the effects on worldwide business have been significant.
It is a particularly testing time for many Hong Kong businesses, especially those in the tourism, hotel, food and beverage and retail environment who, at the end of 2019, were already suffering from declines in revenue brought on by six months of ongoing protests. Official statistics published by the Hong Kong government indicate that visitor numbers to Hong Kong in December 2019 declined by 51% compared to the previous year. Visitors from mainland China to Hong Kong have also dropped significantly to a few hundred visitors per day, a figure that previously could reach over 30,000 per day.
How Kroll Can Help
Kroll has significant experience helping clients deal with the destructive effects of major business disruptions. Our team of experts is ready to assist and provide advice during these challenging times.
Below are some critical issues confronting our clients and how we can help to address:
One of the most common problems faced by many businesses in the wake of COVID-19 is reduced revenue from the general downturn in business. This, particularly for undercapitalized businesses, gives rise to reduced cash flow and the ability to meet payment obligations.
When faced by a major business disruption, directors and senior management must be mindful of their obligations to key stakeholders and ensure that that they do not trade whilst insolvent by continuing to incur debt, such as placing orders with key suppliers, that the company is not able to repay. Insolvent trading potentially exposes the directors and senior management to risk of prosecution.
Where Kroll Can Help
One of the consequences of any form of business disruption is the inability to meet contract obligations. Examples include:
Where Kroll Can Help
Under such situations we encourage the parties to try and negotiate an amicable commercial solution given the unforeseen nature of the disruption. However, in some situations, this is not possible, particularly where the disruption simply brings to a head pre-incident problems facing the underlying business. In these situations, Kroll is often called in to assess, quantify and document the financial impact of the breach of contract for the purpose of legal proceedings or an insurance claim.
Our experience demonstrates that business disruption can also give rise to increased incidents of fraud. Examples include businesses that seek to falsify revenue to meet required ratios pursuant to finance facilities and thereby ensuring retention of existing credit lines.
Similarly, employees may be pressured to falsify revenue targets to achieve bonus/commission targets or simply to justify their continued employment.
Where Kroll Can Help
Kroll can assist key stakeholders including management, shareholders, financiers or other investors to identify and quantify fraud or assist in the implementation of measures to prevent fraud.
The current economic downturn provides an ideal opportunity for many businesses to take stock of their operations and address non-performing parts of their business including surplus entities.
Where Kroll Can Help
Our expertise includes assisting in the winding down and subsequent liquidation of unprofitable non-core entities and ensuring the delivery of significant cost savings in the process. We have particular expertise in working across jurisdictions on restructuring complex corporate structures in conjunction with existing service providers, including lawyers and tax advisors.
Should you require any assistance with disruptions stemming from the COVID-19 outbreak or any other crises, please feel free to contact any of our team members.
Having advised companies on crisis situations, our experience suggests that the sooner proactive steps are taken, the greater the likelihood of mitigating the negative outcomes of a major business disruption.
We will continue to monitor the development of the COVID-19 situation, and report on its financial impact on businesses across impacted sectors in the region. We understand that this is a difficult time for all our clients, their staff and families, and our thoughts are with everyone affected.
Financial and operational restructuring and enforcement of security, including investigation, preservation and realization of assets for investors, lenders and companies.
Our Offshore Restructuring practice draws upon Kroll's broad financial services industry expertise to provide effective, timely advice and solutions.