(4.) Shares are frequently held in tong names, names invented by the individual partner for the pur- pose of holding property and, not infrequently, also for the purpose of concealing his identity from the general public.
(5.) Before a dividend is paid out of profits interest on capital, usually at the rate of 10% per annum, is paid to the partners who have subscribed it. (6.) Many firms have, in addition to the partners subscribing capital, a bung kú or red share- holder, a person, usually the promoter or mana- ger, who is given a share though he subscribes no capital. He gets no interest on capital but be shares with the partners the suplus profit after interest on capital has leeu paid. He is not, moreover, liable for the debts of the firm. The objection to the recognition of the first of these characteristics is that unless the unpaid creditor of an insol- vent firm can find and suc every single partner of the debtor firm he cannot hope to be paid in full. But this is uor a fatal objection as his position is better than that of the ereditor of an insolvent limited company who cannot reach the private property of individual shareholders at all.
As to the second characteristie. There seems no reason why the death of a partner should destroy the partnership. In fact in the case of limited partnerships registered under the Imperial Act 7 EL VII chaj. 21 the death of a limited partner does not dissolve the partnership. But the death of a partner would result of course, in a change in the pro- portionate interests of the remaining parchers in the firm, and the value of the share of the dead partuer would have to be paid to li's personal representatives. It would be undesirable, if only for fiscal reasons, to recognise the right of sons to take their deceased father's share without taking out Letters of Administration,
As to the third characteristic. There is priu â fecie, no reason why a firm should not hold a share in another firm. This can be done subject to one limitation under the present partnership law (see Warner v. Smith 32 L. J. Ch, 573), The limitation is that imposed by section 4 of the Com- panies Ordinance No. 1 of 1865 which provides that no partnership consisting of more than twenty persons may be formed for the purpose of carrying on any business that has for its object the acquisition of gain unless it is registered as a company, A firm is not, like a body corporate, a single entity. It is merely a convenient name for describ- ing a number of individuals who are associated together,- So if firms are allowedin discriminately to take shares in other firms the number of partners in the latter firms would often exceed twenty. The difficulty can be got over by providing that where a firm is registered as a partner it is to be regarded for the purposes of the Ordinance as one person, and by providing that only one of its members should be allowed to interfere in the management of the partnership in which the firm has taken a share,
With regard to the fourth characteristic. It is undesir able that individuals should hide their identity under tong names. It is submitted that a Chinese partner should be registered either in the first name he receives after birth or in the name he receives when he reaches manhood's estate. A tong name may be registered in addition.
The last two characteristics are typically Chinese and to ignore them in a Bill intended, as far as possible, to give eflect to Chinese customs would be measurably to defeat the object of the Bill.
The accompanying Bill embodies the views expressed in this memorandum. Registration is voluntary but partners who do not register are subject to the unlimited liability of the present partnership law. The principles of the new Bill are essentially different from the principles of the Limited Partnership Act 1907 which limits the liability of sleeping partners and which, some day, it may be necessary to introduce into the Colony; but as far as it has been practicable to do so the Bill is modelled on that Act.
C. GRENVILLE ÅLABASTER,
Attorney General,
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