XN000022-1981-05-13 — Page 5

WEDNESDAY, MAY 13, 1981

+CLAUSE 18 INTRODUCES A REQUIREMENT, NAMELY THAT A DEPOSIT- TAK ING COMPANY INCORPORATED IN HONG KONG SHOULD BUILD UP ITS SHAREHOLDERS' FUNDS - ITS PAID-UP CAPITAL AND RESERVES - TO AN ADEQUATE LEVEL BEFORE IT CAN PAY OUT IN DIVIDENDS MORE THAN TWO-THIRDS OF ITS AFTER-TAX PROFITS, OR BEFORE IT CAN DISTRIBUTE ANY EXTRAORDINARY PROFITS. THE SUGGESTED LEVEL OF ADEQUACY FOR

SHAREHOLDERS' FUNDS IS $20 MILLION.

+CLAUSE 21 ALSO INTRODUCES LIMITATIONS ON THE SHAREHOLDINGS AND ON THE INTERESTS IN LAND AND BUILDINGS WHICH MAY BE HELD BY A DEPOSIT-TAKING COMPANY,

+THE NEW SECTION 23(C) LIMITS, AGAIN TO NOT MORE THAN 25 PER CENT OF ITS PAID-UP CAPITAL AND RESERVES, THE TOTAL VALUE OF INTERESTS IN LAND SITUATED IN OR OUTSIDE HONG KONG WHICH MAY BE PURCHASED OR HELD BY A DEPOSIT-TAK ING COMPANY.

+CLAUSE 20 SEEKS TO TIGHTEN THE EXISTING RESTRAINTS ON UNSECURED LOANS (OR OTHER UNSECURED FACILITIES) MADE BY A DEPOSIT- TAK ING COMPANY TO CONNECTED BORROWERS.

+ IT ALSO SEEKS TO PROHIBIT ENTIRELY THE GRANTING BY A DEPOSIT- TAKING COMPANY TO ANY DIRECTOR, OR ANY OF HIS RELATIVES, OF AN UNSECURED LOAN ON A PERSONAL BASIS.

+TWO FURTHER RESTRAINTS ARE PROPOSED ON LOANS OR ADVANCES MADE BY A DEPOSIT-TAKING COMPANY. CLAUSE 18 SEEKS TO PROHIBIT THE MAKING OF ANY LOAN AGAINST THE SECURITY OF SHARES IN THE DEPOSIT-TAK ING COMPANY CONCERNED.

+CLAUSE 21 PROVIDES THAT A DEPOSIT-TAKING COMPANY MAY NOT MAKE AN UNSECURED LOAN (OR OTHER UNSECURED FACILITY) TO AN EMPLOYEE IN AN AMOUNT EXCEEDING ONE YEAR'S SALARY.

+CLAUSE 5, 8 AND 10 SEEK TO APPLY TO DEPOSIT-TAKING COMPANIES A CONTROL WHICH ALREADY APPLIES TO LICENSED BANKS, NAMELY, A CONTROL ON THE EXTENT TO WHICH THEY CAN OPEN BRANCHES, IN HONG KONG OR ELSEWHERE. THE PURPOSE OF THIS CONTROL IS TO ENABLE THE COMMISSIONER OF DEPOSIT-TAK ING COMPANIES TO ENSURE THAT A DEPOSIT- TAX ING COMPANY DOES NOT, BY AN EXCESSIVELY FAST PROGRAMME OF OPENING NEW BRANCHES, OVER-STRETCH THE MANAGEMENT RESOURCES AVAILABLE TO THE COMPANY, EITHER AT BRANCH MANAGER LEVEL OR IN THE HEAD OFFICE IN HONG KONG. THE CLAUSE ALSO PROVIDES FOR AN ANNUAL FEE TO BE PAID IN RESPECT OF EACH BRANCH MAINTAINED IN HONG KONG BY A DEPOSIT-TAKING COMPANY.

+TWO NEW PROVISIONS ARE PROPOSED AS A RESULT OF CERTAIN DIFFICULTIES THE COMMISSIONER OF DEPOSIT-TAKING COMPANIES HAS EXPERIENCED IN ADMINISTERING THE ORDINANCE SINCE 1976.

+CLAUSE 12 PROVIDES FIRST THAT EVERY DEPOSIT-TAK ING COMPANY MUST AT ALL TIMES MAINTAIN A PLACE OF BUSINESS IN HONG KONG AND SECOND THAT EVERY DEPOS IT-TAKING COMPANY SHALL APPOINT AS ITS CHIEF EXECUTIVE AN INDIVIDUAL WHO IS NORMALLY RESIDENT IN HONG KONG.

/+CLAUSE 16