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purchase of their own shares in due course, after the
four legislative safeguards referred to in paragraph
above are in place.
We expect therefore to be able to put forward some substantive
recommendations in the coming year or in our next report.
2.
Section 79 of the Companies Ordinance (Payment of
certain debts out of assets subject to floating
charge in priority to claims under the charge) and
Section 265 of the Companies Ordinance (Preferential payments)
2.1
The background to the problem which has arisen in connection
with automatic crystallisation of a floating charge before the appointment
of a receiver, was explained in the Standing Committee's Report for 1985,
pages 11 13. The Report concluded by explaining that the Committee
thought that it would be prudent to follow the Australian precedent and
put the point beyond doubt by amending Section 79 of the Companies
Ordinance in the same way as had been done in Australia, but that we
would like to have the views of various professional and business
organisations before reaching a final decision.
2.2
The views of these organisations were received early in
1986 and were, in principle, all in favour of amending Section 79
as proposed. The Standing Committee also noted that the section
corresponding to our Section 79 in Britain, i.e. Section 196 of the
Companies Act 1985, had, in the meantime, been amended by the
Insolvency Act 1985 to deal with the problem. Although the wording
adopted in Britain differed from that used in the Australian legislation,
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