TNAG-1817-FCO40-2578-Broadcasting-in-Hong-Kong-1988 — Page 11

Legal Implications

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on

AGC has advised that there is no legal impediment to enacting legislation imposing further restrictions corporate structure and foreign ownership. Although it is not impossible that a disgruntled shareholder might seek legal recourse in private or public law, there is little, if any, prospect of recovering by legal action against the Administration losses that

that may be proved to have been suffered as a result of new legislation.

Comments of the Commissioner for Securities and Commodities Trading (CSCT)

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Assuming that HK-TVB Ltd. and ATV Holdings Ltd. would become the licensee companies (as opposed to the current licensee companies TV B Ltd. and ATV Ltd.), implementation of recommendations (b) (c) would require HK-TVB Ltd. and ATV Holdings Ltd. to hive-off activities which are not directly associated or connected with broadcasting and to seek the approval of the BA

BA for retaining those directly associated with television broadcasting. The CSCT has advised that the disinvesting required will decrease the asset backing and therefore the value of the shares of the two listed companies. Members of the public are likely to have purchased shares in HK-TV B Ltd. and ATV Holdings Ltd. on the basis of the current corporate structure

structure and may raise objections to forced re-structuring exercise.

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a

It may be argued that implementation of the BA's recommendations concerning foreign ownership would have a constraining effect on the trading of shares by foreign institutions. The imposition of the restrictions may be seen as going against the open spirit of the Hong Kong market and may cause existing foreign shareholders to dispose of their holdings. The Administration believes, however, that an aggregate limit of under 35% for total foreign holdings would not unduly inhibit foreign institutions from trading in the shares in the two future licensee companies. The implementation of recommendation (f) would also help to ensure orderly trading of the relevant shares in the market.

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CSTC has advised that trading in the shares in HK-TVB Ltd. and ATV Holdings Ltd. should be suspended on the day following the press conference if it is a trading day.

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CONFIDENTIAL