TNAG-1645-FCO40-2292-Company-law-reform-in-Hong-Kong-Companies-(Amendment)-(No.-2-1987 — Page 3

aggregate of its called-up capital and its undistributable reserves. The Sub-Committee recommended that new legislation along the lines of the British legislation be adopted with minor modifications. Having considered the Sub-Committee's report, the Standing Committee believes that the legislation recommended by the Sub-Committee

will only

only codify

codify what already good accounting practice and accordingly recommends that new legislation on "distributable profits" be introduced.

9

is

The Standing Committee subsequently gave consideration to the purchase by a company of its own shares and to section 48. Having examined the advantages for allowing company to buy their Own shares and the different character of private and public companies, the Standing Committee recommends that unlisted companies

unlisted companies only be given power to purchase their own shares, subject to the same conditions and in accordance with the same procedures as apply in Britain and subject to the prior or contemporaneous enactment of the Standing Committee's recommendations on "distributable profits". The Standing Committee further recommends that the question of allowing listed companies to purchase their own shares be re-considered after satisfactory legislation has been enacted dealing with (a) disclosure of beneficial ownership of shareholdings; (b) insider dealing; (c) distributable profits; and (a) fiduciary duties of directors.

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With regard to section 48, the Standing Committee believes that this provision is seriously outdated. Amendments should be made to enable unlisted companies to provide financial assistance for purchase of their Own shares. However, the relevant British legislation was not seen as entirely practical. The

has Standing Committee therefore instructed its Secretary to draft proposals for the new provisions detailed by the Committee which would be more suited to the practical needs of Hong Kong and to obtain the views of interested organisations upon them. Some substantive recommendations on this subject will be submitted to Government this year or in the Standing Committee's next report.

H

II

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Registration of charges created by companies (section 80(2)(c) & (e) of the Ordinance)

Ordinance sets out a basic

Section 80 of the obligation to register certain types of

types of charges created by companies. A charge created or evidenced by an instrument which, if executed by an individual, would require registration as а bill of sale (section 80 (2) (c)) and a charge on book debts of the company (section 80 (2) (c) (e)) are two of the registrable charges. A number of professional organisations asked Government to clarify the scope section 80 (2) (c) & (e). In 1984, the Standing appointed a Sub-Committee to consider this subject.

CONFIDENTIAL

of

Committee