XN000022-1995-04-07 — Page 6

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Proposed Companies Ordinance amendments

The Government has proposed amendments to the Companies Ordinance to introduce a new class of preferential payment for depositors in the event of the liquidation of a bank.

Details of the proposals are contained in the Companies (Amendment) Bill 1995 which has been gazetted today (Friday).

Explaining the background of the proposed amendments, a Government spokesman said the Government decided in 1993 that legislative amendments should be pursued to provide for priority payment for bank depositors in the event of the liquidation of a bank.

"This is intended to provide a measure of comfort for depositors," the spokesman said.

Under the proposal, eligible depositors would receive priority payment of the first $100,000 net deposits in the event of the liquidation of a bank.

The new class should rank immediately after the existing classes for remuneration and other payments to employees and statutory debts.

The spokesman said the proposal covered all depositors except those who were connected with the bank, such as its directors, controllers, senior management, parent, sister and subsidiary companies; the Hong Kong Monetary Authority and banking institutions.

The new class may diminish dividends to very large depositors, excluded depositors and ordinary creditors where less than full dividend is paid.

However, the proposal would contribute to a more speedy liquidation by reducing the number of creditors very considerably at an early stage of the winding up.

The spokesman said some 80 per cent to 90 per cent of deposit accounts typically fell into the $100,000 or below category.

"The notional loss of having to give up a certain percentage of dividend payment may be more than compensated for by the accelerated receipt of their money by the other creditors and the reduction in administrative costs," the spokesman said.