TNAG-1645-FCO40-2292-Company-law-reform-in-Hong-Kong-Companies-(Amendment)-(No.-2-1987 — Page 77

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purchase of their own shares in due course, after the

four legislative safeguards referred to in paragraph

above are in place.

We expect therefore to be able to put forward some substantive

recommendations in the coming year or in our next report.

2.

Section 79 of the Companies Ordinance (Payment of

certain debts out of assets subject to floating

charge in priority to claims under the charge) and

Section 265 of the Companies Ordinance (Preferential payments)

2.1

The background to the problem which has arisen in connection

with automatic crystallisation of a floating charge before the appointment

of a receiver, was explained in the Standing Committee's Report for 1985,

pages 11 13. The Report concluded by explaining that the Committee

thought that it would be prudent to follow the Australian precedent and

put the point beyond doubt by amending Section 79 of the Companies

Ordinance in the same way as had been done in Australia, but that we

would like to have the views of various professional and business

organisations before reaching a final decision.

2.2

The views of these organisations were received early in

1986 and were, in principle, all in favour of amending Section 79

as proposed. The Standing Committee also noted that the section

corresponding to our Section 79 in Britain, i.e. Section 196 of the

Companies Act 1985, had, in the meantime, been amended by the

Insolvency Act 1985 to deal with the problem. Although the wording

adopted in Britain differed from that used in the Australian legislation,

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