| National Security (Legislative Provisions) Bill:
proscribed organizations
- a response to points raised by Mr Winston Poon QC
| In a letter addressed to the
Secretary for Security dated 12 June 2003,
Mr Winston Poon QC commented on certain proposals
relating to organizations proscribed under
the proposed section 8A of the Societies
Ordinance. This paper is a response to those
comments. |
| Amendments to Companies Ordinance? |
| 2. |
In the final paragraph of his letter, Mr
Poon states that "Neither the Schedule
to the existing Bill nor the proposed Schedule
2 in the proposed amendments contains an
amendment to the Companies Ordinance".
That is not correct. Item 2 in the Schedule
to the Bill proposes the addition of a new
section 291AAA of the Companies Ordinance. |
| 3. |
However, it is now proposed to delete
that amendment, and to deal with the effects
of proscription on an organization in a
new Schedule 2 to the Societies Ordinance.
As a result, it is no longer proposed to
amend the Companies Ordinance. Instead
certain existing provisions in the Companies
Ordinance will be made to apply to certain
types of proscribed organizations.
|
| Registered companies |
| 4. |
If a proscribed organization is a registered
company, the Administration proposes that,
on application by the Registrar of Companies
to the Court of First Instance, the company
shall be wound up, and sections 360D, 360E,
360F, 360G, 360H, 360I, 360J, 360K, 360L
and 360M of the Companies Ordinance (Cap
32) shall apply to the company as if it were
a company struck off the register and dissolved
under section 360C of that Ordinance. |
| 5. |
The effect of that approach is that provisions
in Part XIIIA of the Companies Ordinance
will govern the winding up. Part XIIIA was
added to the Companies Ordinance in 1984
and, according to the Registrar of Companies,
there are no reform proposals in respect
of it. |
| 6. |
Mr Poon states that Part XIIIA is defective
in that a creditor who is entitled to make
a claim against the organization will have
no recourse. He bases that statement on
the fact that section 290 of the Ordinance
does not apply to a winding up under Part
XIIIA. Section 290 enables the Court to
declare the dissolution of a company to
have been void so as to enable the commencement
of proceedings against it. He suggests
that section 290 should apply.
|
| 7. |
In response, the Registrar of Companies
has commented as follows.
"Striking off and dissolution
In a normal dissolution case (i.e. one
which follows on completion of winding-up)
or one which follows from a striking off under s.291,
the dissolution may be void by an order
of the court, or the company may be restored
to the register by the Registrar so as
to enable the winding-up to continue or people
to complete their dealings with the company.
If, however, a company is struck off
and dissolved under s.360C, no one has
the power
to void the dissolution or restore the
company to the register (s. 360D). What
will happen
is that all the property and rights of
the company shall, upon the striking
off, vest
in the Official Receiver who is obliged
to wind-up the affairs of the dissolved
company
and distribute any dividend to proved
creditors as if a winding-up order had
been made against
the company and he were the liquidator
thereof.
Unliquidated claims against the company
S.360G provides that certain sections
of the Companies Ordinance shall apply
to the
winding-up of a company struck off under
s.360C as if on the day of dissolution
of the company, an order had been made
by the
court for the winding-up of the company
and as if the Official Receiver were
the liquidator
thereof. S.263 and s.264, which provide,
inter alia, for debts provable in a winding-up,
are amongst those sections.
Unliquidated claims, including tort claims,
when converted into quantified claims
by becoming liquidated by judgment or
agreement,
are now provable debts in any mode of
insolvent winding-up. In the case of
a solvent company,
these claims are provable on a 'just
estimate being made so far as possible'.
As both s.263 and s.264 are applicable
to a s.360C winding-up, the provability
of unliquidated
claims is in no way treated differently
in such a winding-up." |
| Unregistered companies |
| 8. |
With regard to any unregistered company
that may be proscribed, the Administration
proposes that winding up should be governed
by Part X of the Companies Ordinance. That
Part is specifically designed for the winding
up of unregistered companies. |
| 9. |
Mr Poon states that the statutory scheme
in Part X is different in several respects
from that in Part XIIIA. The Administration
accepts that there are differences, but these
differences are part of the current company
law and are not created by its proposals.
Moreover, Mr Poon's only example of
unfairness in the differences relates to
the exclusion of section 290 from Part XIIIA.
That issue is dealt with in paragraph 7 above. |
| Dissolution before winding
up |
| 10. |
It is proposed that an unregistered company
that is proscribed under section 8A of the
Societies Ordinance should be regarded as
having been dissolved, and may subsequently
be wound up. Mr Poon regards this order of
events to be unworkable. |
| 11. |
The Registrar of Companies has commented
as follows.
"Dissolution and winding up
In the sense in which the term is used
in the UK as well as in HK, the dissolution
of a company is effected by the Registrar
of Companies removing the name of the
company from the register. Dissolution of a company
ends its legal personality and dissolves
the relationship between the company
and its members.
Dissolution of a company usually comes
after the completion of a liquidation
procedure . The purpose of a liquidation
procedure
is to ensure that, before the company's
existence ceases, all its affairs are
dealt with (or 'wound-up')
which means removing the company from
all its
legal relationships.
There are, however, exceptions to this
normal sequence of events, e.g. s.291
(Registrar may strike defunct company
off register);
s291AA (Registrar may deregister a defunct
private company) and s.360C (CE in Council
may order company engaging in undesirable
activities to be struck off), whereby
companies may become dissolved without
going through
a liquidation procedure." |
| Other organizations |
| 12. |
If an organization is not registered
under the Companies Ordinance, but is registered
under any other Ordinance, it is proposed
that the winding up of that organization
would be conducted -
| (1) |
under the relevant Ordinance,
if it contains winding up provisions;
or |
| (2) |
in other cases, under Part X
of the Companies Ordinance. |
|
| 13. |
Mr Poon does not have any comments on these
arrangements that are additional to those
referred to above. |
Department of Justice
June 2003
#68074
|
