XN000022-1980-07-18 — Page 6

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FRIDAY, JULY 19, 1980

CHANGES TO COMPANY LAW PROPOSED

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THE GOVERNMENT TODAY (FRIDAY) PUBLISHED FOR INFORMATION THE COMPANIES (AMENDMENT) BILL 1980 WHICH, IF IMPLEMENTED, WILL INTRODUCE A SUBSTANTIAL NUMBER OF NEW PROVISIONS DEALING WITH SOME OF THE MOST IMPORTANT ASPECTS OF COMPANY LAW.

THE BILL IMPLEMENTS RECOMMENDATIONS MADE BY THE COMPANIES LAW REVISION COMMITTEE, WHICH WAS APPOINTED IN 1962 TO CONDUCT A GENERAL REVIEW OF COMPANIES LEGISLATION IN HONG KONG.

THE COMMITTEE'S WORK FIRST LED TO A 1971 REPORT WHICH RESULTED IN THE COMPANIES (AMENDMENT) ORDINANCE 1972 (DEALING MAINLY WITH REQUIREMENTS FOR PROSPECTUSES) AND IN THE ENACTMENT OF THE SECURITIES ORDINANCE AND THE PROTECTION OF INVESTORS ORDINANCE.

THE SECOND REPORT OF THE COMMITTEE, COMPANY LAW+, WAS PUBLISHED IN 1973. IN THE REPORT, THE COMMITTEE TRACED HOW COMPANY LAW IN HONG KONG HAD BEEN ALMOST IDENTICAL TO THAT IN BRITAIN UP UNTIL 1948.

HOWEVER, SINCE THE PASSING IN BRITAIN OF THE COMPANIES ACT OF 1948 AND 1967, WHICH HAD NOT BEEN ADOPTED BY HONG KONG, A SERIOUS GAP HAD OPENED UP BETWEEN HONG KONG'S COMPANY LAW AND THAT IN BRITAIN.

THE COMMITTEE FELT THAT THE SIMPLER PROVISIONS OF HONG KONG'S COMPANIES ORDINANCE HAD BEEN ADEQUATE FOR SEVERAL YEARS AFTER 1948 BECAUSE OF THE STATE OF THE HONG KONG ECONOMY AT THAT TIME.

THE ECONOMY HAD SINCE UNDERGONE GREAT CHANGES, HOWEVER AND THE RELATIVELY SIMPLE PROVISIONS OF THE ORDINANCE WERE NO LONGER ADEQUATE, ESPECIALLY IN VIEW OF THE VASTLY INCREASED PARTICIPATION BY MEMBERS OF ALL SECTORS OF SOCIETY IN THE OWNERSHIP OF PUBLIC COMPANIES.

THE COMMITTEE WAS STRONGLY OF THE OPINION THAT MANY CHANGES MUST BE MADE IN COMPANY LAW IN ORDER TO PROVIDE A SOUND BASIS FOR THE PROPER MANAGEMENT OF HONG KONG'S CORPORATE ENTERPRISES, AND EFFECTIVE SAFEGUARDS FOR THE PROTECTION OF ALL THOSE WHO INVEST IN THEM.

A GOVERNMENT SPOKESMAN SAID SOME OF THE RECOMMENDATIONS CONTAINED IN THE SECOND REPORT HAVE ALREADY BEEN IMPLEMENTED.

FOR EXAMPLE, THE COMPANIES (AMENDMENT)(NO.4) ORDINANCE OF 1974 INTRODUCED UP-TO-DATE REQUIREMENTS AS TO THE CONTENTS OF COMPANY ACCOUNTS AND THE COMPANIES (AMENDMENT) ORDINANCE 1978 PROVIDED A REMEDY FOR ANY MEMBER OF A COMPANY WHO COMPLAINS THAT THE AFFAIRS OF THE COMPANY ARE BEING CONDUCTED IN A MANNER UNFAIRLY PREJUDICIAL TO THE INTERESTS OF MINORITY MEMBERS.

/HOWEVER