Panel on Financial Affairs (Minutes) 12 Feb 98

Provisional Legislative Council

PLC Paper No. CB(1) 1262
(These minutes have been
seen by the Administration

Ref : CB1/PL/FA/1

Panel on Financial Affairs

Minutes of Meeting held on Thursday, 12 February 1998, at 5:30 pm in Conference Room A of the Legislative Council Building

Members present :

Hon Paul CHENG Ming-fun, JP (Chairman)
Hon NG Leung-sing
Dr Hon David LI Kwok-po, JP
Hon CHAN Choi-hi
Dr Hon LAW Cheung-kwok

Members absent :

Hon NGAN Kam-chuen (Deputy Chairman)
Hon Eric LI Ka-cheung, JP
Hon Henry WU
Hon Ronald ARCULLI, JP
Dr Hon Philip WONG Yu-hong
Hon CHIM Pui-chung

Public officers attending :

Mr G W E Jones, JP: Registrar of Companies
Mr Eammon O' Connell: Registry Solicitor
Miss Julina CHAN: Principal Assistant Secretary for Financial Services

Clerk in attendance :

Ms Estella CHAN: Chief Assistant Secretary (1)4

Staff in attendance :

Mr Andy LAU: Senior Assistant Secretary (1)6

I Confirmation of minutes and matters arising

(PLC Paper No. CB(1)836 - Minutes of meeting on 17 November 1997)

II Information papers issued since last meeting

(PLC Paper Nos.CB(1)789 -	Information paper on the outcome of the financial services negotiations conducted in the World Trade Organization;
CB(1)849 -	Regional Monitor - Issue No. 9, December 1997 provided by the Stock Exchange of Hong Kong;
CB(1)851(01) -	Financial issues referred from Provisional Legislative Council Members meeting with Wan Chai Provisional District Board; and
CB(1)851(02) -	Financial issues referred from Provisional Legislative Council Members meeting with Kwun Tong Provisional District Board.)

2. Members noted the information papers issued since the last meeting.

III Items for discussion at the next meeting scheduled for 2 March 1998

3. Members agreed to discuss the following items at the next meeting scheduled for 2 March 1998:

Review of constituent stocks of the Hang Seng Index;
Securities and Futures Commission ' s Budget for 1998-99; and
Proposed automatic trading system for the Futures Exchange.

4. Members noted that a draft report on the year ' s work of the Panel would be prepared for the Panel ' s consideration and endorsement at the next meeting before tabling at the Council at the end of the session.

IV Prosecution of directors for failing to file annual returns

(PLC Paper No. CB(1)892(02) - Information paper provided by the Administration)

5.At the invitation of the Chairman, the Registrar of Companies (RC) briefed

6.members on the salient points of the information paper.

6. A member enquired whether the low compliance rate for filing annual returns was attributable to the inadequate penalty and requested information on the number of convictions in 1997 and the fines imposed for breaching the relevant legislation.

7. RC replied that the current level of fines was set at a maximum of $50,000 for each breach together with a daily default fine of $700 for continued default. In 1997, a total of 137 convictions with a total of fines of $2.4 million were reported. The penalty was a matter for the court to decide and varied from case to case depending on the nature of the offences.

8. The member expressed concern about the low prosecution rate among more than 100,000 companies which had failed to file annual returns. RC admitted that the number of summons in 1997 was small. However, with the proposed prosecution policy, it was expected that the number of summons would be substantially increased. The computerization of the Companies Registry (CR) ' s data base would also enable the department to considerably enhance its enforcement role. As to the publicity programme in connection with the implementation of the new prosecution policy, RC noted a member ' s suggestion to beef up the contents of the programme by incorporating latest prosecution figures and the resulting penalties as deterrents against non-compliance with the statutory provisions.

9. In response to a member ' s question, RC said that the CR had no statutory responsibility to remind companies to file annual returns. However, CR had been issuing pamphlets to newly registered companies, reminding them about the statutory requirements for filing annual returns under the Companies Ordinance.

10. A member enquired whether the Administration had any plan to step up enforcement of inaccurate filing of annual returns. RC replied that in between returns, companies still had a statutory responsibility to notify the CR of any changes in information that had taken place, failing which, the companies would be liable to prosecution. However, given the volume of data received by the CR every day and the fact that there were over 470,000 companies in Hong Kong, it was physically impossible for the department to verify every single piece of information filed with it. Furthermore, under section 348A of the Companies Ordinance, the Registrar was not responsible for verifying the truth of any statement made in any document delivered to him for registration. While the CR would make every effort to ensure that the information which it received was as accurate as possible, he stressed that people wishing to make use of the information filed with the CR should also make their own enquiries to verify the accuracy of this information.

11. Members were concerned about the integrity of the information delivered to the CR and enquired whether random checks could be arranged so as to deter inaccurate filing. RC replied that proactive monitoring was not feasible as it would impose an impossible enforcement role on the CR. Similarly, no such monitoring mechanism was found in other common law jurisdictions such as United Kingdom, Singapore and Malaysia. He, however, advised that the CR would carry out examinations and investigations upon receiving complaints from the general public and this was in line with the practice of other common law jurisdictions.

12. The Chairman enquired whether there was any provision to penalize persons for filing inaccurate information. The Registry Solicitor advised that sanctions against the provision of misleading information were provided in the Companies Ordinance. He cited an example whereby directors of a company would be subject to prosecution if they provided misleading information in a prospectus. If convicted, they would be subject to heavy fines and even imprisonment.

V Any other business

13. There being no other business, the meeting ended at 5:55 pm.

Provisional Legislative Council Secretariat
17 April 1998