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LCQ5: FS' power to appoint inspectors to investigate affairs of companies

     Following is a question by the Hon Ronny Tong Ka-wah and a reply by the Acting Secretary for Financial Services and the Treasury, Ms Julia Leung, in the Legislative Council today (December 9):


     Under sections 142 and 143 of the Companies Ordinance, on the application of members of a company with good reason, upon an order made by the court or a special resolution passed by a company, or if it appears to the Financial Secretary (FS) that there are circumstances suggesting those cases stipulated in section 143(1)(c) have occurred, FS may appoint inspectors to investigate the affairs of the company and to report thereon.  By virtue of the power conferred by this Ordinance, FS may also directly regulate the operation of Hong Kong companies.  In this connection, will the Government inform this Council:

(a) whether FS has applied the provisions to appoint inspectors to investigate the affairs of Hong Kong company since the enactment of the above sections; if so, of the dates of such applications, contents of the investigations and summaries of the findings; if not, the reasons for that;

(b) of the criteria, factors of consideration and procedures on which FS at present bases his decisions regarding whether inspectors should be appointed to investigate the affairs of individual companies; besides, when FS is requested by shareholders or members of the public to investigate the affairs of individual companies by invoking the above Ordinance, what criteria and procedures FS adopts for deciding whether he should intervene, and whether he will make public the reasons for making the decision concerned; and

(c) whether FS will exercise this investigation power to make up for the inadequacies of financial regulators in this regard; if so, of the criteria adopted; if not, the justification for that?



(a) According to our records, the Financial Secretary (FS) has in the past invoked sections 142 or 143 of the Companies Ordinance (CO) to appoint inspectors to investigate the affairs of 38 companies.  The company names and the appointment dates are set out in Annex A.  Due to time constraints, we have not been to verify the findings and outcomes of all the cases.  We have listed in Annex B the brief outcome of cases involving 16 companies since 1992.

(b) The FS will only exercise his discretions under sections 142 and 143 of the CO if significant or great public interest is involved.  The FS will consider a number of factors in deciding whether a case involves significant or great public interest, like the scale and scope of the alleged complaints, the expected difficulties, costs and benefits involved in pursuing the investigation, and the availability of alternative remedies, etc.  If an applicant makes an application to appoint an inspector under section 142 of the CO and the FS declines, the FS will normally briefly explain the reasons to the applicant.

(c) As explained above, the FS will consider whether a case involves significant or great public interest in deciding whether to exercise his sections 142 and 143 discretions.  It is worth noting that the Securities and Futures Ordinance (SFO), which took effect in April 2003, gives the Securities and Futures Commission (SFC) more powers to investigate into the affairs of listed companies, and the investigatory powers of the SFC are similar to those available to an inspector appointed under the CO.  However, the SFO, being a more recently enacted piece of legislation, gives more specific powers to the SFC and better suits our current needs.  Besides, investigations under sections 142 and 143 of the CO are only on the affairs of the company, while the grounds for the SFC to commence an investigation under the SFO are wider, covering irregularities and misconduct which affect the securities market and industries.

Ends/Wednesday, December 9, 2009
Issued at HKT 15:20


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