XN000022-1991-03-06 — Page 44

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WEDNESDAY, MARCH 6, 1991

"FURTHERMORE, THE MTRC HAS A HK$5 BILLION FUNDING PROGRAMME TO COMPLETE OVER THE REST OF THE YEAR. THIS PROGRAMME WILL LARGELY INVOLVE RECOURSE TO SWAPS AND, AS I HAVE ALREADY INDICATED, BANKS AND THE CORPORATION ITSELF ARE NOT PREPARED TO ENTER INTO FURTHER SWAP TRANSACTIONS OR SIMILAR DEVICES UNTIL THE CORPORATION'S LEGAL POWERS ARE CLARIFIED," THE FINANCIAL SECRETARY SAID.

SIR PIERS SAID THAT IN ADDITION TO THE NEW POWERS TO BE PROVIDED BY SUBSECTION 11A (1) FOR THE CORPORATION TO ENTER INTO FINANCIAL CONTRACTS OR ARRANGEMENTS, THE CORPORATION ALSO WOULD BE EMPOWERED TO FORM SUBSIDIARIES IN ORDER TO FACILITATE AN EXERCISE OF THAT POWER.

"IT IS COMMON PRACTICE FOR TRADING COMPANIES TO FORM FINANCING SUBSIDIARIES IN OTHER JURISDICTIONS BECAUSE MULTINATIONAL LENDERS ARE INVOLVED IN COMPLEX FINANCING TRANSACTIONS. THE PRACTICE IS LONG ESTABLISHED IN INTERNATIONAL FINANCIAL MARKETS AND IS RECOGNISED IN THE INLAND REVENUE ORDINANCE," HE SAID.

"CONCERNS HAVE BEEN RAISED AS TO THE PURPOSE OF THE PROPOSED SUBSECTION 11A(2). I SHOULD, THEREFORE, ADD THAT THE CORPORATION ALWAYS BELIEVED ON THE BASIS OF LEGAL ADVICE THAT BY VIRTUE OF SECTION 6 (1) IT ALREADY HAD THE POWER TO FORM SUBSIDIARIES TO CARRY OUT THE PURPOSES EXPRESSED IN THE ORDINANCE, IF TO DO SO WOULD BE EXPEDIENT · FOR OR CONDUCIVE TO THE CONDUCT OF ITS BUSINESS.

"IN THE PAST IT HAS DONE SO BUT HAS ONLY FORMED SUBSIDIARIES IN HONG KONG, AND NOT OVERSEAS. IT WAS CONSIDERED, HOWEVER, BY THE LEADING LONDON COUNSEL ADVISING THE CORPORATION IN RESPECT OF THIS BILL THAT IF A NEW POWER WERE TO BE GRANTED TO THE CORPORATION BY SECTION 11A (1) IT WAS ARGUABLE AS TO WHETHER SECTION 6(1) WOULD BE SUFFICIENTLY WIDE TO EMPOWER THE CORPORATION TO FORM SUBSIDIARIES ΤΟ CARRY OUT THAT NEW POWER.

"COUNSEL, THEREFORE, ADVISED THAT IT WOULD BE PRUDENT ΤΟ INCLUDE THE PROPOSED SECTION 11A(2) IN THE BILL IN ORDER TO PRECLUDE ANY FUTURE LEGAL CHALLENGE," THE FINANCIAL SECRETARY SAID.

"IT MAY ALSO ALLAY CONCERNS IF I EXPLAIN THAT THE CORPORATION IS NOT EMPOWERED BY SECTION 6(1), NOR WILL IT BE EMPOWERED BY PROPOSED SECTION 11A(2), TO FORM SUBSIDIARIES EXCEPT TO CARRY OUT THE FUNCTIONS OF THE CORPORATION SPECIFIED IN THE ORDINANCE.

"FURTHERMORE, THE POWER POSSESSED BY ANY SUBSIDIARY COULD BE NO GREATER THAN THOSE POSSESSED BY THE CORPORATION ITSELF. THIS NEW SUBSECTION IS NOT A DEVICE FOR MOVING THE CORPORATION'S OPERATIONS OFFSHORE NOR FOR CIRCUMVENTING THE CONTROLS IMPOSED ON THE CORPORATION BY THE ORDINANCE,' SIR PIERS SAID.

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MOVING LATER THE SECOND READING OF KOWLOON-CANTON- RAILWAY CORPORATION (AMENDMENT) BILL 1991, SIR PIERS SAID THE REASONS FOR INTRODUCING THIS BILL WERE SIMILAR TO THOSE HE GAVE WHEN MOVING THE MASS TRANSIT RAILWAY CORPORATION (AMENDMENT! BILL.

/THE PROPOSALS