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Secretary of State
for the Colonies
No. 232.-
Commercial Counsellor, Shanghai, No. 17.
H
No:- 62.
JOVERNMENT HOUSE,
HONG KONG,
22nd September, 1948.
sir,
? he. in China
I have the honour to bring to your notice a situation which has arisen from the failure of certain former China Companies, which have transferred their registration to Hong Kong, to comply with the necessary formalities consequent upon such transfer.
2.
In the view of my legal advisers the correct course for former China Companies to have adopted after being registered in Hong Kong was to bring their register of members to Hong Kong and then, if they wished to maintain a register in China, to obtain leave to keep a local or branch register. About 40 Companies have in fact obtained permission to open branch registers but with few exceptions these Companies have not proceeded to constitute principal and branch registers in the true sense of these terms - that is to say, they have not specified which shares are on their principal register and which on their branch register as is clearly recuired by sub-section (4) of Section 104 of the Companies Ordinance, 1932. They have in most cases merely duplicated the register originally kept in China.
3.
Apart from the obligation of a Company to keep its statutory books at its registered office the necessity of constituting a principal register in Hong Kong and of distinguishing clearly which shares are on such register has only recently assumed importance owing to the fact that after the 19th of September, 1948, any shares which are on the Hong Kong register will become liable to stamp and estate duty whereas shares on a branch register in China will be exempt by virtue of Section 105 of the Companies Ordinance, 1932. Until the 19th of September, however, special exemption was granted by virtue of Regulation 13 of the Registration of Companies Regulations, 1947 (published in the Gazette of the 26th September, 1947) as amended by Regulations published in the Gazette of the 23rd April, 1948.
4. Now that they appreciate the necessity of regularising the position ex-China Companies have, rather belatedly, approached the Government of Hong Kong and asked for its assist- ance. The position is complicated by the fact that a large number of shareholders are Chinese nationals or resident in China and that the export of foreign securities from China is prohibited. by Chinese law unless a special licence is obtained. As nearly all ex-China Companies have converted their capital into Hong Kong dollars the shares in such Companies would, I am advised, constitute foreign securities within the meaning of the Chinese law but it would not constitute an offence to cancel the share certificates in taels or Chinese National Currency and send them to Hong Kong. Nevertheless, if this Government were to insist on this being done, it would provide an easy means for Chinese to evade the spirit of the financial restrictions and to acquire
HIS BRITANNIC MAJESTY'S
CHARGE D'AFFAIRES,
TT A
** • WT
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