44
45
(Cap. 29.)
Advance against security of own shares, etc.
Limitation on
advances by authorized institutions.
(2) For the purposes of sections 87, 88, 89, 90 and 92, "value" means-
(a)
in the case of shares in a company other than a trust company registered under Part VIII of the Trustee Ordinance, the total of the current book value and the amount for the time being remaining unpaid on the shares; and
(b) in any other case, the current book value.
(3) For the purposes of sections 81, 83, 84, 87, 88, 89, 90, 91, 92, 93, 94 and 95, "reserves" means reserves which appear in the accounts of the authorized institution concerned, and does not include any reserves which are represented by the writing down of the value of assets or by provision for the depreciation of fixed assets.
(4) For the purposes of sections 87 and 88, "share capital" shall include perpetual subordinated debt convertible into equity at option of issuer.
80. (1) An authorized institution shall not grant any advance, loan or credit facility against the security of its own shares.
(2) An authorized institution shall not, except with the approval in writing of the Commissioner, which approval shall be subject to such conditions as the Commis- sioner may think proper to attach thereto, grant any advance, loan or credit facility against the security of the shares of
(a) any holding company;
(b) any subsidiary of the institution; or
(c) any other subsidiary of any holding company.
(3) Every director and every manager of an authorized institution which contravenes subsection (1) or (2) commits an offence and is liable--
(a) on conviction upon indictment to a fine of $100,000 and to imprisonment
for 12 months; or
(b) on summary conviction to a fine of $50,000 and to imprisonment for 6
months.
81. (1) An authorized institution shall not grant or permit to be outstanding- (a) to any one person;
(b) to 2 or more companies which-
(i) are subsidiary companies of the same holding company; or
(ii) have the same controller (not being a company);
(c) to any holding company and one or more of its subsidiary companies; or (d) to any one person (not being a company) and to one or more companies of
which he is the controller,
any advances, loans (whether by way of deposit or otherwise) or credit facilities, including irrevocable documentary letters of credit to the extent to which they are not covered by marginal cash deposits, or give any financial guarantees or incur any other liabilities on their behalf to an aggregate amount of such advances, loans, facilities, guarantees or liabilities in excess of 25 per cent of the paid-up capital and reserves of the institution:
Provided that this subsection shall not apply to—
(a) transactions between authorized institutions, or between the branches of
authorized institutions;
(b) transactions to the extent to which they are covered by a form of guarantee
acceptable to the Commissioner;
(c) an authorized institution the liabilities of which are assured by a letter of comfort accepted by the Commissioner under subsection (2) while the institution conforms with any limitation on the aggregate amount of any advances, loans, facilities, guarantees or liabilities which the institution may make imposed by the Commissioner under subsection (4)(a) or (6) or by the terms of the letter of comfort;
(d) the purchase of telegraphic transfers;
(e) the purchase of bills of exchange or documents of title to goods where the holder of such bills or documents is entitled to payment outside Hong Kong for goods exported from Hong Kong;
(f) any advances or loans made against telegraphic transfers or against any bills
or documents referred to in paragraph (e);
(g) any advances or loans made to the Government;
(h) any advances or loans, maturing or callable within one year, made to any
eligible government within the meaning of the Third Schedule; or
(i) transactions between authorized institutions and banks incorporated out-
side Hong Kong which are not licensed under this Ordinance. (2) The Commissioner may, for the purposes of paragraph (c) of the proviso to subsection (1), where the authorized institution is a bank, accept a letter of comfort if that letter of comfort-
(a)
is given by another bank which—
(i) is a shareholder in the bank for the benefit of which the letter of comfort is given;
(ii) controls any body corporate which is a shareholder in the bank for the benefit of which the letter of comfort is given; or
(iii) is a bank controlled by a body corporate which is either a share- holder in the bank for the benefit of which the letter of comfort is given or controls any body corporate which is a shareholder in that bank;
(b) is given by another bank incorporated in Hong Kong or a bank established in a place where there is a banking supervisory authority and that bank is, in the opinion of the Commissioner, adequately supervised by that authority; and
(c) has been given pursuant to a resolution of the board of directors of the other bank and with the knowledge of the banking supervisory authority of the place where the other bank is incorporated.
(3) The Commissioner may, for the purposes of paragraph (c) of the proviso to subsection (1), where the authorized institution is a deposit-taking company, accept a letter of comfort if that letter of comfort-
(a) is given by a bank which—
(i) is a shareholder in the deposit-taking company;
(ii) controls any body corporate which is a shareholder in the deposit- taking company; or
(iii) is a bank controlled by a body corporate which is either a share- holder in the deposit-taking company or controls any body corporate which is a shareholder in the deposit-taking company;
(b) is given by a bank incorporated in Hong Kong or a bank established in a place where there is a banking supervisory authority and that bank is, in the opinion of the Commissioner, adequately supervised by that authority; and
(c) has been given pursuant to a resolution of the board of directors of the bank and with the knowledge of the banking supervisory authority of the place where the bank is incorporated.
(4) In accepting any letter of comfort under subsection (2) or (3) the Com- missioner-
Third Schedule.