TNAG-1645-FCO40-2292-Company-law-reform-in-Hong-Kong-Companies-(Amendment)-(No.-2-1987 — Page 61

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1. (1) Section 48 of the Companies Ordinance (Prohibition

of provision of financial assistance by a company

for the purchase of its own shares)

(2) Purchase by a company of its own shares

(3) Distributable Profits

1.1

The background to these subjects was explained in the Standing

Committee's Report for 1985, pages 2 9. The last paragraph of the

relevant section read as follows:

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"We decided that before we reached any decisions on the

subjects of Section 48 and purchase by a company of its own shares,

we would have to have a decision on whether the Companies Ordinance

should contain detailed provisions on distributable profits. The

subject is a particularly technical one and it has to be remembered

that the British legislation was drafted very much with the British

tax system in mind. The Committee therefore appointed a Sub-Committee

consisting of Mr. Connolly as Chairman, two co-opted members of the

Law Society of Hong Kong and two co-opted members of the Hong Kong

Society of Accountants to consider and report on it. The Sub-Committee

has met on a number of occasions and we understand that they expect to

be able to submit their recommendations in the first quarter of 1986.

Once these are to hand, we shall resume our consideration of both Section 48

and the question of the purchase by a company of its own shares."

1.2

In fact, the Sub-Committee's Report was issued in May. It

was a thorough document with an admirably clear explanation of the

reasons for its recommendations, which were to the effect that the

British legislation should be adopted subject to a number of amendments

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