TNAG-1356-FCO40-1797-Constitutional-development-in-Hong-Kong-1985 — Page 5

competitors) is discussed, directors or shareholders eta, of it should withdraw, because they have a direct pecuniary interest. But when matters affecting the entire industry are discussed (e.g. regulation of the banking industry, or whether further Licences should be issued and how many) companies in that industry have only a remote pecuniary interest (i.e. in essence: the same as every other company in the industry) and accordingly their directors and shareholders should declare their interests for the information of Members, but usually not withdraw.

A director of a company which owns a significant interest in another company, etc which itself has a significant direct pecuniary interest in an item under discussion, may have a close pecuniary interest therein and it is a matter of degree whether he should withdraw or not. In the case of investment companies, it is only substantial holdings of equity, which holdings form a substantial part of the investment fund, which would normally require withdrawal.

Na distinction should be made between executive and non-executive directorships. Both types of director owe identical legal duties under the Companies Ordinance to forward the interests of their shareholders, and it is this duty which creates a conflict of interest with the need to give dispassionate advice to the Governor in Council. Obviously in borderline cases an executive director would be more likely to fall on the withdrawal side of the line.

The director of a property company with significant residential holdings, or the owner or tenant of a rented flat, would have a pecuniary interest and should so declare and withdraw, unless invited by the Governor to remain, when rent control is discussed, because such Members or their companies have a direct pecuniary interest.

NOTIFICATION

14

It would be helpful if Members who had an interest of either kind to declare could do so, informing the Chief Secretary or Attorney General if possible the day before the

This will allow meeting, so that the Governor may be informed.

the Governor time to consider whether he wishes the Member to remain, rather than being faced with the problem in Council without time for reflection.

DECTRICTED