TNAG-2795-FCO40-4035-Relations-between-Hong-Kong-and-Taiwan-1993 — Page 71

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MEMORANDUM FOR EXECUTIVE COUNCIL

FOREIGN CORPORATIONS BILL

THE PROBLEM

Legislation is required to allay concern over the corporate status of a body incorporated under the laws of a territory which is not recognized by the United Kingdom (UK) as a State.

Α

RECOMMENDATION AND ADVICE SOUGHT

2

It is recommended that the Foreign Corporations Bill (the Bill), as at Annex A, should be introduced into the Legislative Council.

B

3

Members will be asked to advise whether this recommendation should be approved.

BACKGROUND AND ARGUMENT

4

The Foreign Corporations Act 1991 (the UK Act) (at Annex B) was enacted in July 1991 to enable the legal capacity of foreign corporations incorporated under the laws of territories which were not recognized as States by the UK to be accepted in the UK. The effect of the Act is to put it beyond doubt that obligations flowing from contracts entered into by those corporations are enforceable. We understand it was principally aimed at Taiwan and Turkish Cyprus, and was a response to concern expressed by the legal profession over the status of corporations from these territories when entering into contractual relationships with UK counterparts.

5

Similar concern has been expressed by the legal profession in Hong Kong over the status of the growing number of corporations incorporated in "territories not recognised by the UK", such as Taiwan and North Korea. We feel that commercial realities require the enactment of local legislation similar to the UK Act so as to provide a basis on which the legal capacity of such corporations in Hong Kong can be determined. Apart from achieving this purpose, the Bill also has the effect of ensuring the stability and continuity in trading relations with territories which may become non-recognized States temporarily because of political changes in the future.

Executive Council