Enclosure 3.
# THE SHARE CONTRACTS BILL.
Hon. J. J. Keswick - Sir, I am desirous of introducing an Ordinance to this Council, but in consequence of the present meeting being perhaps the last previous to the recess, I am afraid it cannot be done unless your Excellency would assent to the suspension of the Standing Orders.
His EXCELLENCY - Would you mention the name of the Ordinance.
Hon. J. J. Keswick - It is “An Ordinance to amend the law in respect to the sale of shares in companies registered under the Hongkong Companies Ordinances 1865-83 and in other Joint Stock Companies."
The ACTING ATTORNEY-GENERAL - I beg to second the suspension of standing rule No. 33, which requires that Bills shall be circulated two days before they are read a first time.
Carried.
Hon. J. J. Keswick - I may briefly explain, sir, that the object of the proposed Ordinance is to alter the law which at present enables persons to deal in shares under what are called time contracts, shares which they do not hold at the time. The Ordinance I propose is based upon an Imperial Act of 1867 which is called Leehan's Act, and which was framed, I believe, for the specific purpose of preventing any discriminating action being taken by operators in the stocks of certain banks in a manner likely to discredit the banks, a notion which on one occasion I understand had a very serious effect upon one bank in particular. In Hongkong, I propose the Ordinance should have generally the same application, but in some respects slightly different. At the present time, it is the custom, and during the last two or three years, especially last year, it has been very strongly brought to the notice of the public that a business, one may say apart from all other business, has grown up in Hongkong which enables brokers to dispose of shares for payments at a future time, of which they are not in possession. The effect, I think no one will be found to dispute, is exceedingly serious in its nature, and in many cases during the last year has led, I am certain, to ruin, and in some instances, I fear, to crime. The operation of this particular kind of business is one which is perhaps not at once readily perceived unless one has given some attention to it. For instance, if one disposes of a thousand shares in any particular institution for delivery six months afterwards, not having to declare the numbers of the shares or the name of the holder, he is in a position, having sold at a profitable rate, to depress the value up to the time of delivery, to the very great disadvantage of the person who bought them. It enables him, over and over again possibly, to sell the same shares. I do not think any one will be found to support the morality of that, and I am satisfied this Ordinance, which is based on Leehan's Act, can only have a good effect on this business in our midst. Apart from the prevention of the wholesale gambling in shares on the part of young people and people of little experience to their own ruin and the disturbance of legitimate pursuits, apart I say from that altogether, there is, perhaps, another object which I think is a right and fair one to have in view, and that is that persons who may have property in any institution here, banking or of any other nature, should not see in the journals or the price current reports from the Colony that stocks in which they are interested are unduly depressed for reasons which are not assigned. Such depression of stocks by time operators has as bad an effect on the property of people outside the Colony as on those here resident. Therefore, sir, I will ask for leave to introduce this Bill, which is "An Act to amend the law relating to the sale of shares in Joint Stock Companies."
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I regret that there are only two unofficial members, my hon. friend (Hon. C. P. Chater) and myself present, and therefore I cannot hear a general expression of opinion from all of them, but I trust this Ordinance will meet with the approval of the Council.
The ACTING ATTORNEY-GENERAL - I am sure every member of this Council will be glad to co-operate with the hon. member in his endeavour to put a stop to the losses and abuses which he has brought to our notice to-day. I am somewhat taken by surprise and I cannot offer a decided opinion on the Bill which the hon. member wishes to introduce. It was only brought to my notice a few hours ago that it was his intention to move the Bill to-day and I have not had time to examine the question, but I would like to make a few remarks on it - observations which have struck me on the spur of the moment. There is no doubt this Bill will require very serious consideration, for it is well-known there is in this Colony a very large business indeed done in the sale and purchase of shares on what we know as time bargains, and up to the present moment those transactions have been looked upon as perfectly legal and have been recognised by the Courts of Justice. The effect of this Bill would be, to a great extent, to stop these transactions, or at least to render them very uncertain indeed as the Ordinance would declare such contracts void. One of the questions, therefore, which might be asked is - Is not this measure too drastic? for notwithstanding the abuses which have taken place, there have been a very large number of these transactions which are perfectly legitimate. When two persons have come to an agreement with respect to the sale and purchase of shares and when they are fully able to carry out their contract when the time comes for the performance of it, is the legislature to step in and stop the effect of it, because the matter has not turned out favourably to one of the parties? Again, will the Bill have the effect of stopping such transactions? If the measure is contrary to public opinion, or in advance of public opinion, we may see the spectacle of this legislature having passed a law which is being openly violated every day, and I think that would have a very demoralising effect. These and some other points will require very careful consideration and all I am prepared to say to-day, on behalf of the Government, is that the Government has no objection to the first reading of the Bill to-day, provided that such consent will not in any way bind its future action. The Government promises to give to this question a very fair and full consideration.
Hon. C. P. CHATER seconded the first reading.
His EXCELLENCY - As the Attorney-General has just remarked, this is a very important measure and I am not prepared to-day to offer any opinion upon it. From the remarks made by the hon. member who has introduced the Bill, it would seem it is a measure in many respects desirable to pass. On the other hand, from the remarks of the Attorney-General, it is undoubtedly a measure to which very mature consideration should be given. Under these circumstances, the Government has no objection at all to the first reading, but as the Attorney-General has remarked, it must be understood that the Government in no way pledges itself to support its further stages. So far as I am in a position to speak to-day, I must say I do not see that there is anything objectionable in the principle of the Bill. As to the details, they can be considered in Committee if the Bill is read a second time. Further than these remarks, I do not feel I would be justified in offering any further opinion upon it.
The Bill was read a first time.
Enclosure 3.
THE SHARE CONTRACTS BILL.
Hon. J. J. KESWICK-Sir, I sin desirous of introducing au Ordinance to this Council, but in consequence of the present meeting being per- haps the last previous to the recess. I am afraid it cannot be done unless your Excellency would assent to the suspension of the Standing Orders
His EXCELLENCY-Would you mention the name of the Ordinance.
Hon. J. J. Keswick-Itis “ An Ordinaoue to amend the law in respect to the sale of shares in companies registered under the Hongkong Companies Ordinances 1865-83 and in other Jointtock Companies."
The ACTING ATTORNEY-GENERAL-I beg to second the suspension of standing rule No. 33, which requires that Bills shall be circulated two | days before they are read a first time.
Carried
Hon. J. J. KasWICK-I may briefly explain. sir, that the object of the proposed Ordinance is to alter the law which at present enables per- sons to deal in shares undèr what are called time contracts, shares which they do not hold at the time. The Ordinance I propose is based upon so Imperial Act of 1867 which is called Lee- man's Act, and which was framed. I believe, for the specific purpose of preventing any discrimi- nating action being taken by operators in the stocks of certain banks in a manner likely to dis- credit the banks, notion which on one occasion I !noderstand had a very serious effect upon one bank in particular. In Hongkong I propose the Ordinance should have generally the sawe application, but in some respects slightly differ eut. At the present time it is the custom, and during the last two or three years, especially last year, it has been very strongly brought to the notice of the public that a business, one may say apart of from all other business. has grown up in Hongkong which enables brokers to dispose of shares for payments at a future time, of which they are not in possession. The effect, I think no one will be found to dispute, is exceeding ly serious in its nature, and in many cases during the last year has led, I am certain, to rain, and in some instances, I fear, to crime. The operation of this particular kind of business is one which is perhaps not at ones readily perceived unless one has given some at- tention to it. For instance, if one disposes of a thousand shares in any particular institution for delivery six months afterwards, not having to declare the numbers of the shares or the name of the holder, he is in a position, having sold at a profitable rate, to depress the value up to the time of delivery, to the very great disadvantage of the person who bought thein. It enables him, over and over again possibly, to sell the same shares. I do not think any one will be found to support the morality of that, and I am satisfied this Ordinance, which is based on Leehan's Act, can only have a good effect on this business in our midst. Apart from the prevention of the wholesale gambling in shares on the part of young people and people of little experience to their own ruia and the disturbanos of legitimate pursuits, apart I say from that altogether, there is, per-
haps, another object which I think is a right and fair one to have in view, and that is that persons who may have property in any institu tion here, banking or of any other nature, should not see in the journals or the price current re- ports from the Colony that stooks in which they are interested are unduly depressed for reasons which are not assigned. Such depression of stocks by time operators has as bad an effect on the property of poop's ontside the Colony As on those here resident. Therefore, sir, I will ask for leave to introduce this Bill, which is "An Act to amend the law relating to
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546
19594
Rec
REF 6 OCT 90]
the sale of shares in Point Stock Companies." I regret that there are only two unofficial mem. bers, my hon. friend (Hoa. C. P. Chater) and myself present, and therefore I cannot hear a general expression of opinion from all of them, but I trust this Ordinance will meet with the approval of the Council,
The ACTING ATTORNEY-GENERAL-I am sure every member of this Council will be glad co-operate with the hon. member in his endes- vour to put a stop to the losses and abuses which he has brought to our notico to-day. I am somewhat takon by surprise and I cannot offer a decided opinion on the Bill which the hon. meni- ber wishes to introduce. It was only brought to my notice a few hours ago that it was his intention to move the Bill to-day and I have not had time to examine the question, but I would like to made a far remarks on it-observations which bavo struck me on the spur of the moment. There is no doubt this Bill will require very serious consideration, for it is well-known there is in this Colony a very large business indeed done in the sale and purchase of shares on what we know as time bargains, and up to the present moment those transactions have been looked upon as per- fectly legal and have been recognised by the Courts of Justice. The effect of this Bill would ba, to a great extent; to stop these transactions, or at least to render them very uncertain indeed as the Ordinance Wunk degtare such contracts void. Oue of the questions, therefore, which might be asked is-Is not this messure too drastic Pį for notwithstanding the abases which have taken place, there have been a very large number of these transactions which are per- fectly legal. When two persons have come to an agreement with respect to the sale and purchase of shares and when they are fully able to carry out their confract when the time cornes for the performance of it, is the legislatura to step in and stop the effect of it, because the matter has not turned ont favourably to one of the parties ? Again, will the B. have the effect of stopping such transactinus P If the measure is contrary to public opiniou, or in advance of public opiniou, we may see the spectacle of this legislature having passed a law which is being openly violated every day, and I think that would have a very demoralising effect. These and some other points will require very careful consideration and all I am pre- pared to say to-day, on behalf of the Government, is that the Government has no objection to the first reading of the Bill to-day, provided that such consent will not in any way bind its future | action. The Government promises to give to this question a very fair and full consideration.
Hon. C. P. CHATER seconded the first reading. His EXCELLEECY-As the Attorney-General has just remarked this is a very important mea gure and I am not prepared to-day to offer any opinion upon it. From the remarks made by the hon. member who has introduced the Bill, it would seem it is a measure in many respects desirable to pass. On the of her hand, from the remarks of the Attorney-General, it is undoubt- edly a measure to whiob very mature considera- tion should be given. Under these circumstances the Government has no objection at all to the first reading, but as the Attorney-General bas remarked, it must be understood that the Government in no way pledges itsoif to support ita further stages. So far as I am in a position to speak to-day, I must say I do not see that there is anything objec tionable in the principle of the Bill. As to the details, they can be considered in Committee if the Bill is read a second time. Further than these remarks, I do not feel I would be justified in offering any further opinion upon it.
The Bill was read a first time.
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