Section: 49H Heading: The capital redemption reserve Version Date: 30/06/1997
(1) Where under this Ordinance shares of a company are redeemed or purchased wholly out of the company's profits, the amount by which the company's issued share capital is diminished in accordance with section 49A(4) on cancellation of the shares redeemed or purchased shall be transferred to a reserve, called "the capital redemption reserve" (资本赎回储备).
(2) If the shares are redeemed or purchased wholly or partly out of the proceeds of a fresh issue and the aggregate amount of those proceeds is less than the aggregate nominal value of the shares redeemed or purchased, the amount of the difference shall be transferred to the capital redemption reserve.
(3) Subsection (2) does not apply if the proceeds of the fresh issue are applied by the company in making a redemption or purchase of its own shares in addition to a payment out of capital under section 49I.
(4) The provisions of this Ordinance relating to the reduction of a company's share capital apply as if the capital redemption reserve were paid-up share capital of the company, except that the reserve may be applied by the company in paying up its unissued shares to be allotted to members of the company as fully paid bonus shares.
Section: 49I Heading: Power of private companies to redeem or purchase own shares out of capital Version Date: 30/06/1997
Expanded Cross Reference:
49I, 49J, 49K, 49L, 49M, 49N, 49O
Redemption or purchase of own shares out
of capital (private companies only)
(1) Subject to sections 49I to 49O, a private company limited by shares or limited by guarantee and having a share capital may, if so authorized by its articles, make a payment in respect of the redemption or purchase under section 49A or (as the case may be) section 49B, of its own shares otherwise than out of its distributable profits or the proceeds of a fresh issue of shares. <* Note - Exp. X-Ref.: Sections 49I, 49J, 49K, 49L, 49M, 49N, 49O *>
(2) References in this section to payment out of capital are (subject to subsection (6)) to any payment so made, whether or not it would be regarded apart from this section as a payment out of capital.
(3) The payment which may (if authorized in accordance with this Ordinance) be made by a company out of capital in respect of the redemption or purchase of its own shares is such an amount as, taken together with-
(a) any available profits of the company; and
(b) the proceeds of any fresh issue of shares made for the purposes of the redemption or purchase,
is equal to the price of redemption or purchase; and the payment permissible under this subsection is referred to in section 49S as the "permissible capital payment".
(4) Subject to subsection (6), if the permissible capital payment for shares redeemed or purchased is less than their nominal amount, the amount of the difference shall be transferred to the company's capital redemption reserve.
(5) Subject to subsection (6), if the permissible capital payment is greater than the nominal amount of the shares redeemed or purchased-
(a) the amount of any capital redemption reserve, share premium account or fully paid share capital of the company; and
(b) any amount representing unrealised profits of the company for the time being standing to the credit of any revaluation reserve maintained by the company,
may be reduced by a sum not exceeding (or by sums not in the aggregate exceeding) the amount by which the permissible capital payment exceeds the nominal amount of the shares.
(6) Where the proceeds of a fresh issue are applied by a company in making any redemption or purchase of its own shares in addition to a payment out of capital under this section, the references in subsections (4) and (5) to the permissible capital payment are to be read as referring to the aggregate of that payment and those proceeds.
Section: 49J Heading: Availability of profits for purposes of section 49I Version Date: 13/02/2004
(1) The reference in section 49I(3)(a) to available profits of the company is to the company's profits which are available for distribution (within the meaning of Part IIA); but the question whether a company has any profits so available and the amount of any such profits are to be determined for purposes of that section in accordance with subsections (2), (3), (4), (5) and (6), instead of sections 79F, 79G, 79H, 79I, 79J and 79K.
(2) Subject to subsection (3), that question is to be determined by reference to-
(a) profits, losses, assets and liabilities;
(b) provisions for depreciation, diminution in value of assets and retentions to meet liabilities; and
(c) share capital and reserves (including undistributable reserves),
as stated in the relevant accounts for determining the permissible capital payment.
(3) The relevant accounts for this purpose are such accounts, prepared as at any date within the period for determining the amount of the permissible capital payment, as are necessary to enable a reasonable judgment to be made as to the amounts of any of the items mentioned in subsection (2)(a) to (c).
(4) For purposes of determining the amount of the permissible capital payment, the amount of the company's available profits (if any) determined in accordance with subsections (2) and (3) is treated as reduced by the amount of any distributions lawfully made by the company after the date of the relevant accounts and before the end of the period for determining the amount of that payment.
(5) The reference in subsection (4) to distributions lawfully made by the company includes-
(a) financial assistance lawfully given out of distributable profits in a case falling within section 47D or 47E;
(b) any payment lawfully made by the company in respect of the purchase by it of any shares in the company (except a payment lawfully made otherwise than out of distributable profits); and
(c) a payment of any description specified in section 49C(1) lawfully made by the company.
(6) Reference in this section to the period for determining the amount of the permissible capital payment is to the period of 3 months ending with the date on which the statement of the directors purporting to specify the amount of that payment is made in accordance with section 49K(3). (Amended 28 of 2003 s. 20)
Section: 49K Heading: Conditions for payment out of capital Version Date: 13/02/2004
(1) Subject to any order of the court under section 49O, a payment out of capital by a private company for the redemption or purchase of its own shares is not lawful unless the requirements of this section and sections 49L and 49M are satisfied.
(2) The payment out of capital shall be approved by a special resolution of the company.
(3) The company's directors shall make a statement specifying the amount of the permissible capital payment for the shares in question and stating that, having made full inquiry into the affairs and prospects of the company, they have formed the opinion- (Amended 28 of 2003 s. 21)
(a) as regards its initial situation immediately following the date on which the payment out of capital is proposed to be made, that there will be no grounds on which the company could then be found unable to pay its debts; and
(b) as regards its prospects for the year immediately following that date, that, having regard to their intentions with respect to the management of the company's business during that year and to the amount and character of the financial resources which will in their view be available to the company during that year, the company will be able to continue to carry on business as a going concern (and will accordingly be able to pay its debts as they fall due) throughout that year.
(4) In forming their opinion for purposes of subsection (3)(a), the directors shall take into account the same liabilities (including prospective and contingent liabilities) as would be relevant under section 177 to the question whether a company is unable to pay its debts.
(5) The directors' statement shall be in the specified form, shall be signed by the directors and shall contain such information with respect to the nature of the company's business as may be specified by the Registrar, and shall in addition have annexed to it a report addressed to the directors by the company's auditors stating that- (Amended 3 of 1997 s. 16; 28 of 2003 s. 21)
(a) they have inquired into the company's state of affairs;
(b) the amount specified in the statement as the permissible capital payment for the shares in question is in their view properly determined in accordance with sections 49I and 49J; and (Amended 28 of 2003 s. 21)
(c) they are not aware of anything to indicate that the opinion expressed by the directors in the statement as to any of the matters mentioned in subsection (3) is unreasonable in all the circumstances. (Amended 28 of 2003 s. 21)
(6) A director who signs a statement under this section without having reasonable grounds for the opinion expressed in the statement is liable to imprisonment or a fine, or both. (Amended 28 of 2003 s. 21)
(7) In relation to a resolution agreed to, or proposed to be agreed to, in accordance with section 116B giving approval under subsection (2), then-
(a) section 49L(2) shall not apply but, for the purposes of section 116B(1), a member holding shares to which the resolution relates shall not be regarded as a member who would be entitled to attend and vote;
(b) section 49L(4) shall not apply but the documents referred to in that section shall be supplied-
(i) to each member by whom, or on whose behalf, the resolution is required to be signed in accordance with section 116B; and
(ii) at or before the time at which the resolution is supplied to the member for signature. (Added 46 of 2000 s. 6)
Section: 49L Heading: Procedure for special resolution under section 49K Version Date: 13/02/2004
(1) The resolution required by section 49K shall be passed on, or within the week immediately following, the date on which the directors make the statement required by that section; and the payment out of capital shall be made no earlier than 5 nor more than 7 weeks after the date of the resolution. (Amended 28 of 2003 s. 22)
(2) The resolution is ineffective if any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution and the resolution would not have been passed if he had not done so.
(3) For purposes of subsection (2), a member who holds such shares is to be regarded as exercising the voting rights carried by them in voting on the resolution not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll; and, notwithstanding anything in a company's articles, any member of the company may demand a poll on that question.
(4) The resolution is ineffective unless the directors' statement and auditors' report required by section 49K are available for inspection by members of the company at the meeting at which the resolution is passed. (Amended 28 of 2003 s. 22)
(5) For purposes of this section a vote and a demand for a poll by a person as proxy for a member are the same (respectively) as a vote and demand by the member.
Section: 49M Heading: Publicity for proposed payment out of capital Version Date: 13/02/2004
(1) Within the week immediately following the date of the resolution for payment out of capital the company shall cause to be published in the Gazette a notice-
(a) stating that the company has approved a payment out of capital for the purpose of acquiring its own shares by redemption or purchase or both (as the case may be);
(b) specifying the amount of the permissible capital payment for the shares in question and the date of the resolution under section 49K; (Amended 28 of 2003 s. 23)
(c) stating that the directors' statement and auditors' report required by that section are available for inspection at the company's registered office; and (Amended 28 of 2003 s. 23)
(d) stating that any creditor of the company may at any time within the 5 weeks immediately following the date of the resolution for payment out of capital apply to the court under section 49N for an order prohibiting the payment.
(2) Within the week immediately following the date of the resolution the company shall also either cause a notice to the same effect as that required by subsection (1) to be published once in each of an English language newspaper and a Chinese language newspaper specified in the list issued for the purposes of section 71A or give notice in writing to that effect to each of its creditors.
(3) References in this section to the first notice date are to the day on which the company first publishes the notice required by subsection (1) or first publishes or gives the notice required by subsection (2) (whichever is the earlier).
(4) Not later than the first notice date the company shall deliver to the Registrar a copy of the directors' statement and of the auditors' report required by section 49K. (Amended 28 of 2003 s. 23)
(5) The directors' statement and auditors' report- (Amended 28 of 2003 s. 23)
(a) shall be kept at the company's registered office throughout the period beginning with the first notice date and ending 5 weeks after the date of the resolution for payment out of capital; and
(b) shall during business hours on any day during that period be open to the inspection of any member or creditor of the company without charge.
(6) If an inspection required under subsection (5) is refused, the company and every officer who is in default is liable to a fine and, for continued default, to a daily default fine.
(7) In the case of refusal of an inspection required under subsection (5) of a directors' statement or auditors' report, the court may by order compel an immediate inspection of that statement or report. (Amended 28 of 2003 s. 23)
Section: 49N Heading: Objections by company's members or creditors Version Date: 30/06/1997
(1) Where a private company passes a special resolution approving for purposes of this Ordinance any payment out of capital for the redemption or purchase of any of its shares-
(a) any member of the company other than one who consented to or voted in favour of the resolution; and
(b) any creditor of the company,
may within 5 weeks of the date on which the resolution was passed apply to the court for cancellation of the resolution.
(2) The application may be made on behalf of the persons entitled to make it by such one or more of their number as they may appoint in writing for the purpose.
(3) If an application is made, the company shall-
(a) forthwith give notice in the specified form of that fact to the Registrar; and (Amended 3 of 1997 s. 17)
(b) within 15 days from the making of any order of the court on the hearing of the application, or such longer period as the court may by order direct, deliver an office copy of the order to the Registrar.
(4) A company which fails to comply with subsection (3), and any officer who is in default, is liable to a fine and for continued default, to a daily default fine.
Section: 49O Heading: Powers of court on application under section 49N Version Date: 30/06/1997
Expanded Cross Reference:
49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P 49Q, 49R, 49S
(1) On the hearing of an application under section 49N the court may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the court's satisfaction for the purchase of the interests of dissentient members or for the protection of dissentient creditors (as the case may be); and the court may give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.
(2) Without prejudice to its powers under subsection (1), the court shall make an order on such terms and conditions as it thinks fit either confirming or cancelling the resolution; and, if the court confirms the resolution, it may in particular by order alter or extend any date or period of time specified in the resolution or in any provision in sections 49 to 49S which applies to the redemption or purchase of shares to which the resolution refers. <* Note - Exp. X-Ref.: Sections 49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R, 49S *>
(3) The court's order may, if the court thinks fit, provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company's capital, and may make such alterations in the company's memorandum and articles as may be required in consequence of that provision.
(4) If the court's order requires the company not to make any, or any specified, alteration in its memorandum or articles, the company shall not then have power without leave of the court to make any such alteration in breach of the requirement. (Amended 80 of 1997 s. 102)
(5) An alteration in the memorandum or articles made by virtue of an order under this section, if not made by resolution of the company, is of the same effect as if duly made by resolution; and this Ordinance applies accordingly to the memorandum or articles as so altered.
Section: 49P Heading: Effect of company's failure to redeem or purchase Version Date: 30/06/1997
Supplementary
(1) This section has effect where a company has, on or after the commencement* of the Companies (Amendment) Ordinance 1991 (77 of 1991)-
(a) issued shares on terms that they are or are liable to be redeemed; or
(b) agreed to purchase any of its own shares.
(2) The company is not liable in damages in respect of any failure on its part to redeem or purchase any of the shares.
(3) Subsection (2) is without prejudice to any right of the holder of the shares other than his right to sue the company for damages in respect of its failure; but the court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the costs of redeeming or purchasing the shares in question out of distributable profits.
(4) If the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased, the terms of redemption or purchase may be enforced against the company; and when shares are redeemed or purchased under this subsection, they are treated as cancelled.
(5) Subsection (4) does not apply if-
(a) the terms provided for the redemption or purchase to take place at a date later than that of the commencement of the winding up; or
(b) during the period beginning with the date on which the redemption or purchase was to have taken place and ending with the commencement of the winding up the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.
(6) There shall be paid in priority to any amount which the company is liable under subsection (4) to pay in respect of any shares-
(a) all other debts and liabilities of the company (other than any due to members in their character as such);
(b) if other shares carry rights (whether as to capital or as to income) which are preferred to the rights as to capital attaching to the first-mentioned shares, any amount due in satisfaction of those preferred rights,
but, subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.
(7) Where by virtue of section 71 of the Bankruptcy Ordinance (Cap 6) as applied by section 264, a creditor of a company is entitled to payment of any interest only after payment of all other debts of the company, the company's debts and liabilities for purposes of subsection (6) include the liability to pay that interest.
Section: 49Q Heading: Power for Chief Executive in Council to modify certain sections Version Date: 13/02/2004
Expanded Cross Reference:
49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R, 49S
(1) The Chief Executive in Council may by regulations modify sections 49 to 49S with respect to any of the following matters- <* Note - Exp. X-Ref.: Sections 49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R, 49S *>
(a) the authority required for a purchase by a company of its own shares;
(b) the authority required for the release by a company of its rights under a contract for the purchase of its own shares or a contract under which the company may (subject to any conditions) become entitled or obliged to purchase its own shares;
(c) the information to be included in a return delivered by a company to the Registrar in accordance with section 49G(1);
(d) the matters to be dealt with in the statement of the directors under section 49K with a view to indicating their opinion of their company's ability to make a proposed payment out of capital with due regard to its financial situation and prospects; and (Amended 28 of 2003 s. 24)
(e) the contents of the auditors' report required by that section to be annexed to the directors' statement. (Amended 28 of 2003 s. 24)
(2) The Chief Executive in Council may also by regulations so made make such provision (including modification of sections 49 to 49S) as appears to him to be appropriate- <* Note - Exp. X-Ref.: Sections 49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R, 49S *>
(a) for wholly or partly relieving companies from the requirement of section 49I(3)(a) that any available profits shall be taken into account in determining the amount of the permissible capital payment under that section; or
(b) for permitting a company's share premium account to be applied, to any extent appearing to the Chief Executive in Council to be appropriate, in providing for the premiums payable on redemption or purchase by the company of any of its own shares.
(3) Regulations under this section-
(a) may make such further modification of sections 49 to 49S and sections 79J(2) and (3) and 79M as appears to the Chief Executive in Council to be reasonably necessary in consequence of any provision made under such regulations by virtue of subsection (1) or (2); <* Note - Exp. X-Ref.: Sections 49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R, 49S *>
(b) may make different provision for different cases or classes of case; and
(c) may contain such further consequential provisions, and such incidental and supplementary provisions, as the Chief Executive in Council thinks fit.
(4) No regulations shall be made under this section unless a draft of them has been laid before and approved by resolution of the Legislative Council and section 34 of the Interpretation and General Clauses Ordinance (Cap 1) shall not apply to such regulations.
Section: 49R Heading: Transitional cases arising under sections 49 to 49S; and savings Version Date: 30/06/1997
Expanded Cross Reference:
49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R, 49S
(1) Any preference shares issued by a company before the commencement* of the Companies (Amendment) Ordinance 1991 (77 of 1991) which could but for the repeal by that Ordinance of section 49 have been redeemed under that section are subject to redemption in accordance with the provisions of this Ordinance as amended by that Ordinance.
(2) In a case to which sections 49 and 49A apply by virtue of this section, any premium payable on redemption may, notwithstanding the repeal by the Companies (Amendment) Ordinance 1991 (77 of 1991) of any provision of this Ordinance, be paid out of the share premium account instead of out of profits, or partly out of that account and partly out of profits (but subject to the provisions of this Ordinance as amended by that Ordinance so far as payment is out of profits).
(3) Any capital redemption reserve fund established before the commencement* of the Companies (Amendment) Ordinance 1991 (77 of 1991) by a company for the purposes of the repealed section 49 is to be known as the company's capital redemption reserve and be treated as if it had been established for the purposes of section 49H; and accordingly, a reference in any enactment or in the articles of any company, or in any other instrument, to a company's capital redemption reserve fund is to be construed as a reference to the company's capital redemption reserve.
Section: 49S Heading: Definitions for sections 49 to 49R Version Date: 30/06/1997
Expanded Cross Reference:
49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R
(1) In sections 49 to 49R- <* Note - Exp. X-Ref.: Sections 49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R *>
"distributable profits" (可分发利润), in relation to the making of any payment by a company, means those profits out of which it could lawfully make a distribution (within the meaning given by section 79B(2)) equal in value to the payment;
"permissible capital payment" (容许资本付款额) means the payment permitted by section 49I.
(2) In sections 49 to 49R, references to "payment out of capital" (从资本中拨款支付) are to be construed in accordance with section 49I. <* Note - Exp. X-Ref.: Sections 49, 49A, 49B, 49BA, 49C, 49D, 49E, 49F, 49G, 49H, 49I, 49J, 49K, 49L, 49M, 49N, 49O, 49P, 49Q, 49R *>
Section: 50 Heading: Power to issue shares at a discount Version Date: 30/06/1997
(1) Subject as provided in this section, it shall be lawful for a company to issue at a discount shares in the company of a class already issued:
Provided that-
(a) the issue of the shares at a discount must be authorized by resolution passed in general meeting of the company, and must be sanctioned by the court;
(b) the resolution must specify the maximum rate of discount at which the shares are to be issued;
(c) not less than 1 year must at the date of the issue have elapsed since the date on which the company was entitled to commence business;
(d) the shares to be issued at a discount must be issued within 1 month after the date on which the issue is sanctioned by the court or within such extended time as the court may allow.
(2) Where a company has passed a resolution authorizing the issue of shares at a discount, it may apply to the court for an order sanctioning the issue, and on any such application the court, if, having regard to all the circumstances of the case, it thinks proper so to do, may make an order sanctioning the issue on such terms and conditions as it thinks fit.
(3) Every prospectus relating to the issue of the shares must contain particulars of the discount allowed on the issue of the shares or of so much of that discount as has not been written off at the date of the issue of the prospectus. If default is made in complying with this subsection, the company and every officer of the company who is in default shall be liable to a fine and, for continued default, to a daily default fine. (Amended 80 of 1974 s. 8; 7 of 1990 s. 2)
