Bond Corporation International Limited
participation, between, on the one hand, a foreign indivi- dual or a company which is wholly owned by foreign corpora- tions or individuals, and, on the other hand, a company which has an identifiable level of Hong Kong equity participation.
In this regard, assume that a prospective investor is a joint venture company, which is owned as to 60% by a company incorporated and carrying on business in, say, Singapore, and 40% by Hong Kong interests, and that the Hong Kong directors of this company are in a minority. Further, it is assumed that this joint venture company is interested in buying shares in a Hong Kong television company, and that the relevant legislation imposes res- trictions on the acquisition of more than 50% of such shares by a foreign entity. For these purposes, it is accepted that the Singapore company may not be permitted to take up a holding in excess of 50%. However, it is submitted that in determining the level of foreign investment arising a result of the acquisition by the joint venture company of shares in the television company in this example, only 60% of the shareholding interest acquired should be taken into account.. In other words, for the purposes of deter- mining the extent of a foreign interest, the underlying equity interest of the Hong Kong investor should not be disregarded. This would necessitate the inclusion in any legislative amendment of "tracing" provisions. Also, as stated above, it would be necessary to include provision for a minimum shareholding threshold (e.g. 5%) in the legislation.
If you would like any of the above points elaborated on in more detail, do not hesitate to contact me.
Yours sincerely,
-John V. McGuigan
Director
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