Seg. 6/5141/47
SAVINGRAM
To the Secretary of State for the Colonies.
From the Governor, Hong Kong.
Date 16th November, 1948.
No.77%
77%
CONFIDENTIAL.
five
(3) on 9315/1/48
3
Legislation.
1.
My savingram 579 - Revision of Public Utility
In the course of a preliminary discussion in Executive Council, it was questioned by Sir Man Kam Lo whe ther United Kingdom legislation provides precedents for the application of dividend regulation provisions to companies incorporated earlier under statutory powers which did not provide for such regulation.
2.
The Electricity Supply Acts and the Gas Undertakings Act 1934 amongst others were quoted as examples of the application of restrictions to existing companies, but Sir Man Kan Lo was not satisfied that his point had been met and asked for examples to be quoted by reference to specific companies. As this would necessitate reference to the Private Acts of such companies which are not available here, I agreed to ask for your assistance in providing this information. I should be grateful therefore if the development of control over public utilities in the United Kingdom in this respect might be illustrated by reference to particular companies.
3.
It was also suggested that the rates chargeable by companies not previously subject to dividend regulation may have been controlled in the United Kingdom so as to permit of not more than a fixed percentage of profit in relation to capital, and that it would be inequitable to apply dividend regulation to companies in Hong Kong whose rates had not previously been controlled on this basis. The point of this argument was that dividend regulation would be inequitable if applied to companies whose shares have recently changed hands at a premium of the order of 300%, because owing to insufficient control of rates charged the companies have earned and declared large dividends. This argument can, of course, be countered by the fact that shares of the Hong Kong Telephone Co., a company subject to control of the kind under consideration have also been quoted at a similar premium; and by the consideration that it is proposed to enforce reasonable rate reductions, pending the introduction of permanent legislation, by virtue of powers under the Supplies and Services (Transitional Powers) Act, 1945.
4.
I should mention that it is believed that in making his main point Sir Man Kam Lo had in mind the electricity companies which at present are governed by the Electricity Supply Ordinance No.18 of 1911, section 3(2) of which merely empowers the Governor-in-Council to make regulations for "securing a regular and sufficient supply of electricity and generally for controlling and regulating the supply". The principle involved is also applicable to the Hong Kong Tramways Co.Ltd., for example, which operates under a franchise embodied in an Ordinance, (No.10 of 1902), which however has been subject to post-war amendment at the request of the Company, as to the fares to be charged by the Company.
5.
I enclose for your information a copy of a confidential paper which has been considered by Executive Council and from the consideration of which Sir Man Kam Lo's query originated.
P. & M. 3- DEC 1948
REGISTRY