CONFIDENTIAL
XCC(91)151
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A proposal to abolish proxy voting for the SEHK has been considered by the Standing Committee on Company Law Reform. While the Standing Committee did not agree that proxy voting should be abolished completely, it accepted that, in order to prevent the proxy system from abuse in future, proxy voting should be allowed only in very restricted circumstances with safeguards put in place to limit the scope for abuse. It further recommended that the SEUO should be amended to such effect that a SEHK member might only appoint a proxy if he were ill, absent from Hong Kong or had other good cause for not voting in person and that, if required, a member should show, by way of Statutory Declaration, that he had such good cause. Moreover, the proxy would have to be a registered employee of the member and could act as a proxy for only one member. In SEHK's revised voluntary package, a limitation has been placed on the appointment of proxy whereby the same person may not be appointed by two or more members and must be a partner or an employee of the member.
(b) SEHK Public Duty Amendment
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The SEHK is a quasi-public institution with a statutory monopoly and an exclusive right to impose fees upon listed companies and other market users. It also retains half of the statutory transaction levy which is, in essence, a form of tax paid by investors. Like exchanges elsewhere, it is subject to regulation designed to ensure that it is operated in a manner which will advance the public interest and, in particular, the interests of the investing public.
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The SEHK has, however, made the point that, because it is a private limited company under the Companies Ordinance, its Directors, i.e. the Council members, owe a fiduciary duty to its shareholders, i.e. the members of SEHK, under normal company law principles. Thus it may not at all times give priority to outside interests, including the interests of the investing public or the public interest. This undermines the ability of SEHK to carry out effective self-regulation in the interests of investors and the public.
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SEHK's voluntary package supports insertion of a provision into the SEUO to make it clear that SEHK has a duty to maintain a fair and orderly market and to act in the public interest, including, in particular, the interests of the investing public. However, SEHK has also requested that its
Executive Council