Sessional_Paper_1929 — Page 191

183

FIRST APPENDIX.

VARIOUS PROPOSALS

for preventing evasion of the stamp duty on share transactions

and of the estate duty on shares.

I.

Passing on of dividends prohibited.

1. Make it illegal to pass on dividends to subsequent unregistered purchasers. This proposal was originally made by the Hong Kong Stock Exchange in 1921, and it is con- curred in by the Hong Kong Sharebrokers Association. It is objected to by the Share and Real Estate Brokers Society of Hong Kong. A draft section to carry out this proposal is annexed (Annexe A). The Committee recommends the enactment of this section.

2. It is hoped that the mere prohibition may be enough with some persons, and that with the others the possibility of prosecution and a heavy penalty will be a sufficient in- ducement to them to abandon a practice which in any case gives them unnecessary trou- ble, and which exposes them to pecuniary risk in the case of partly paid shares.

3. The draft section makes it clear that a trustee will still be entitled to pay to a cestui

que

trust dividends on shares which he holds for that cestui que trust, but it is pro- vided in sub-section (4) that the registered owner is not to be deemed to hold as trustee for any subsequent purchaser.

4. It is also provided that a person who bona fide lends money on shares may claim the dividend if the express written terms of the loan agreement entitle him to do so.

5. The maximum penalty is made $1000 or the total amount of the dividend in question, whichever limit be the greater.

6. One suggestion on the above proposal was that all claims for dividends against the former (registered) owner should be absolutely barred after a year, and that the registered (but no longer beneficial) owner should be empowered and required to repay the dividends (if collected) to the company, or to collect them and pay them into the Treasury. It is assumed that it was intended that the subsequent beneficial owner should be able to claim the dividends from the company, or Treasury, upon getting himself registered as the owner of the shares. The Committee does not recommend the adoption of this suggestion.

7. Another suggestion was that if the proposed draft section were adopted a special form of receipt for dividends passed on should be required by law. This receipt should be a declaration as to the particular ground on which the recipient is entitled to receive. the dividend though not the registered owner. It was suggested that the recipient would hesitate to sign such a declaration if untrue. If he did sign an untrue declaration, pro- secution for evasion would be facilitated. The Committee does not recommend the adop- tion of this suggestion.

II.

Registration in name of deceased to be prima facie evidence of ownership at death for purpose of estate duty, and estate to be liable for contraventions of dividend section (Proposal I), the onus to be on the estate to prove compliance.

8. This was proposed by the Hon. Mr. Breen. A draft section to carry out the proposal is annexed (Annexe B). The Committee recommends its enactment.