TNAG-1645-FCO40-2292-Company-law-reform-in-Hong-Kong-Companies-(Amendment)-(No.-2-1987 — Page 67

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12.

It is not suggested that all the above advantages are necessarily

desirable; (j) in particular may be regarded as objectionable as leading

to market-rigging and (k), trafficking in its own shares, is not self-

But some evidently a desirable corporate activity.

particularly (b),

(c) and (a) clearly are valuable, especially in the case of closely-held

companies and it is in relation to such companies that the power is

mainly used in the U.S.A. Even in these cases, however, the power is clearly

capable of abuse; for example by enabling the management to maintain its

own control or to gain control and to use the company's money in doing so."

Professor Gower went on to explain why there was a case for consideration,

at least, of an extension of the power of a private company to re-purchase

its own shares. He then continued:

116.

The

The case for an extension in relation to public companies is

of a different character. Advantages (a) to (a) are either of no or of

lesser moment, (e) seems undesirable in the case of listed securities

and (j) and (k) are probably actually or potentially objectionable.

only seemingly unobjectionable advantages appear to be (f) to (i). It is, however, doubtful how far use would be made of (f)(h) or (i). If public

companies want to have shares available for stock options or acquisitions

they seem to experience no difficulty in persuading their members to authorise

the creation of further share capital for this purpose. If they want to

reduce, rather than increase, capital they can do so under a formal

reduction scheme which, in the case of larger companies, is a relatively

simple and inexpensive operation. The argument that, if companies could

spend surplus cash on informal reductions by buying their shares, they

would do so rather than engage in possibly dangerous expansion and

diversification seems distinctly dubious in view of the many surveys

which have concluded that the main motivation of company inanagements is

a desire to expand their empires. It is difficult to see how a power

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