2
to make it suitable for Hong Kong's circumstances. It would not be
practical to annex a copy of the Report to this Report because of
its size, but anyone interested in the details can obtain a copy
from the Secretary to the Standing Committee.
1.3
At the risk of over-simplifying the Sub-Committee's recommendations
(the draft recommended legislation annexed to their Report covers eleven
typewritten pages) the principles underlying it can be summarised as follows:
(1) The following basic rules regarding distribution of profit
(2)
will apply to all companies
(a) There may only be treated as distributable
the unapplied excess of realised profit over
realised losses (revenue and capital);
(b) Unrealised profit, of which the classic example
is the revaluation surplus, will not be
distributable; and
(c) Past revenue losses must be made good before
current realised profits are distributable.
The following additional restriction will apply to a
listed company, namely, that it can make a distribution
only to the extent that its net assets after the
distribution are not less than the aggregate of its
called-up share capital and its undistributable reserves.
Undistributable reserves are:
(a) Share premium account;
(b) Capital redemption reserve;
(c) Unrealised profits not previously capitalised less
unrealised losses not previously written-off in a
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