HANG LUNG BANK (COMPENSATION OF FORMER SHAREHOLDERS) REGULATIONS

HANG LUNG BANK (COMPENSATION OF FORMER SHAREHOLDERS) REGULATIONS

HANG LUNG BANK (COMPENSATION OF FORMER
SHAREHOLDERS) REGULATIONS

ARRANGEMENT OF REGULATIONS

Regulation Page
PART I

GENERAL

1. Citation .............................A2
2. Interpretation .......................A2

PART II

DETERMINATION OF COMPENSATION

3. Establishment of Tribunal ............A 2
4. Time limit for seeking compensation ..A 3
5. Appointment of Tribunal ..............A 3
6. Function of the Tribunal .............A 3
7. Hearings .............................A 3
8. Attendance and representation at hearing A4
9. Hearings to be in private ............A 4
10. Decisions of the Tribunal ...........A 4
11. Powers of the Tribunal ..............A 5
12. Costs of the Tribunal ...............A 5
13. Determination .......................A 6
13A. Notice of determination ............A 6
14. Immunity ............................A 6
15. Offences ............................A 6

PART III

PAYMENT OF COMPENSATION

16. Payment of compensation .............A7

Schedule ...........................................................................................
..........................................A7





HANG LUNG BANK (COMPENSATION OF FORMER
SHAREHOLDERS) REGULATIONS

(Cap. 345, section 9)

[3 August 1984]

L.N. 253 of 1984 R. Ed. 1984, L.N. 180 of 1985, L.N. 223 of 1985,27 of 1986

PART I

GENERAL

1. Citation

These regulations may be cited as the Hang Lung Bank (Compensation of

Former Shareholders) Regulations.

2. Interpretation

In these regulations

'Chairman' means the Chairman of the Tribunal appointed under regulation 5;

tteompensation' means compensation payable to former shareholders under
section 8(1) of the Ordinance;

'former shareholder' means a person referred to in section 8(1) of the Ordinance;

'hearing' includes any adjourned hearing;

'representations' includes the calling or giving of evidence;

',shares' means the shares in the capital of the company held by former
shareholders immediately before commencement;

'Tribunal' means the Hang Lung Bank Compensation Tribunal established under
regulation 3.

PART II

DETERMINATION OF
COMPENSATION

3. Establishment of Tribunal

(1) For the purpose of determining the amount of compensation the

Governor may, and if requested in writing by any former shareholder shall,
by notice published in the Gazette, establish a Tribunal to be known as the

Hang Lung Bank Compensation Tribunal.





(2) The Tribunal shall have the functions, powers and duties prescribed
by these regulations.

4. Time limit for seeking compensation

(1) If after 3 months of the coming into operation of these regulations no
request in writing has been made by any former shareholder under regulation
3(1) and the Governor has not established the Tribunal under that regulation,
the Financial Secretary Incorporated may, by notice in writing sent by post to
the last address shown in the share register of the company, advise each former
shareholder of his rights under regulation 3(1) and the effect of this regulation.
(L.N. 180 of 1985)
(2) If a notice is given by the Financial Secretary Incorporated under
subregulation (1) and if after 3 months of the date of service of that notice no
former shareholder shall have made a request in writing under regulation 3(1)
the amount of compensation shall be deemed to be nil. (L.N. 180 of 1985)

5. Appointment of Tribunal

(1) The Tribunal shall consist of 3 persons appointed by the Governor as
follows-
(a) ajudge who shall be Chairman;
(b) 2 other persons neither of whom shall be a public officer.
(2) Every appointment under subregulation (1) shall be notified in the
Gazette.

6. Function of the Tribunal

The function of the Tribunal shall be to determine the amount of
compensation by calculating the value of a single share in accordance with the
factors and principles set out in the Schedule.

7. Hearings

(1) For the purpose of discharging its function under regulation 6 the
Tribunal may, and if requested in writing by a former shareholder shall, by
notice signed by the Chairman and published in the Gazette, give notice
(hereinafter in these regulations referred to as notice of hearing) that it intends
to conduct a hearing at which representations may be made by or on behalf of a
former shareholder or the Financial Secretary Incorporated and requiring any
former shareholder who intends to make representations to give notice to the
Tribunal within such reasonable time and at such address as shall be specified.
(L.N. 180 of 1985)





(2) Within the period specified in the notice of hearing every former
shareholder who intends to make representations at the hearing shall give
notice in writing to the Tribunal of that intention.
(3) Upon expiration of the period stated in the notice of hearing the
Chairman shall fix a day for the hearing and shall, by notice in writing signed
by him, notify the Financial Secretary Incorporated and every former
shareholder who has given notice under subregulation (2) of such date. (L.N.
180 of 1985)

8. Attendance and representation at hearing

At the hearing referred to in regulation 7-
(a)any former shareholder who has given notice under regulation
7(2) or who is permitted by the Tribunal may, subject to any
directions given by the Chairman as to time and location, attend,
make representations and may be represented by counsel or a
solicitor;
(b)the Financial Secretary Incorporated may make representations
and may be represented by counsel or a solicitor or by a legal
officer within the meaning of the Legal Officers Ordinance
(Cap. 87). (L.N. 180 of 1985)

9. Hearings to be in private

(1) All hearings of the Tribunal shall be conducted in private and the
Chairman shall, subject to subregulation (2), determine who may be present
and may exclude any person from any part of the hearing.
(2) A person referred to in regulation 8 shall be entitled to attend and
remain at the hearing.
(3) Except as is provided in regulation 13A, no person shall publish or
otherwise disclose any evidence, submission, document, information or other
matter whatsoever received or made by or, produced or disclosed to the
Tribunal, or used in the course of the hearing. (L.N. 223 of 1985)

10. Decisions of the Tribunal

(1) Any-
(a)exercise by the Chairman of any discretion under these
regulations; or
(b) decision or determination by the Tribunal as to law or fact,
shall, subject to subregulation (4), be final.
(2) Subject to subregulation (3) a decision or determination of any 2
members of the Tribunal shall be the decision or determination (as the case





may be) of the Tribunal and in the event that no 2 members agree the decision
or determination of the Chairman shall be the decision or determination (as the
case may be) of the Tribunal.
(3) On questions of law the decision of the Chairman shall be the decision
of the Tribunal.
(4) The Tribunal shall have power to correct in any decision or
determination any clerical mistake or error arising from any accidental slip or
omission.

11. Powers of the Tribunal

(1) The Tribunal shall, subject to subregulation (2), have power-
(a)for the purpose of regulation 7 to determine who is a former
shareholder;
(b)to receive and consider any material whether by way of oral
evidence, written statements, documents or otherwise, not-
withstanding that such material would not be admissible in
evidence in civil or criminal proceedings;
(c) to determine the manner in which such material shall be received;
(d) to administer oaths and affirmations;
(e)to require, by notice in writing signed by the Chairman, any
person to attend before it at any hearing and to give evidence and
produce documents;
to give directions as to the filing and service of pleadings and
written submissions;
(g)to examine on oath, affirmation or otherwise any person
attending before it at any hearing and require such person to
answer all questions put by or with the consent of the Tribunal;
(h)to determine the procedure to be followed at any hearing
including the power to adjourn the hearing;
(i)to exercise all powers as may be necessary for the procedure of
exercising its function.
(2) A person at any hearing conducted by the Tribunal may refuse to
answer any question or produce any document or thing if to do so would tend
to expose that person or his spouse to proceedings for an offence or for the
recovery of a penalty.

12. Costs of the Tribunal

The costs of the Tribunal shall be paid out of money provided by the
Legislative Council.





13. Determination

The Tribunal shall at the hearing give reasons to such extent as it considers
proper for any determination under regulation 6 and within 14 days thereafter,
by notice signed by the Chairman and sent by post to the last address shown in
the share register of the company, notify each former shareholder of that
determination.

13A. Notice of determination

(1) The Financial Secretary Incorporated shall by notice in the Gazette
give notice of any determination under regulation 6.
(2) The Financial Secretary Incorporated may by such notice as it thinks
fit disclose such matters relating to any determination under regulation 6 that it
considers necessary.
(L.N. 223 of 1985)

14. Immunity

Subject to these regulations any person referred to in regulation 8 who
makes representations at any hearing of the Tribunal, any person summoned by
the Chairman under regulation 11 (1)(e) and the Tribunal as the case may be,
shall have the same privileges and immunities in any hearing or in the exercise
of the Tribunal's functions or powers as they would have had if that hearing or
exercise were a hearing or exercise by a court.

15. Offences

Any person who without lawful authority or reasonable excuse-
(a) contravenes regulation 9(3);
(b) refuses or fails-
(i) to comply with any notice under regulation 11 (1)(e);
(ii)to answer truly and fully any question put to him by or with
the consent of the Tribunal;
(iii)to produce any book, paper or document which the
Tribunal has required him to produce;
(iv) to comply with any lawful order or direction of the
Tribunal;
(c) disturbs or otherwise interferes with the proceedings of the
Tribunal,
shall be guilty of an offence and shall be liable on conviction to a fine of $5,000
and imprisonment for 6 months.





PART III

PAYMENT OF
COMPENSATION

16. Payment of compensation

(1) A former shareholder shall be entitled to be paid compensation equal

to the value of one share as calculated by the Tribunal under Part II multiplied by
the number of shares held by him immediately before commencement, together with
interest on that compensation from commencement until payment at the rate
calculated in accordance with subregulation (2).

(2) For the purpose of subregulation (1) simple interest shall be calculated

daily during the period referred to in subregulation (1) by applying to that
compensation the daily maximum single rate of interest paid on savings accounts
denominated in Hong Kong dollars during that period by members of the Hong
Kong Association of Banks.

(3) Compensation and interest are charged upon and shall be paid out

of money provided by the Legislative Council by the Financial Secretary
Incorporated within 30 days of such provision being made. (L.N. 180 of
1985)

SCHEDULE [reg. 6]

1 (1) In this Schedule, unless the context otherwise requires

'company' includes any subsidiary;

'company as a going concern' means a company continuing to be operated with a view to
paying dividends out of its earnings;

,,earnings' means the profit for one year according to the published results of a company after
taxation and after excluding any extraordinary items;

earnings per share' means earnings divided by the number of shares in issue by a company;

'price earnings ratio' means a figure calculated by dividing the current price of a share of a
company by the earnings per share;

'reconstructed company' means the company reconstructed by the payment into shareholders
funds of the company reconstruction costs referred to in paragraph 6;

',shareholders funds' means the net assets of the company calculated in accordance with
subparagraph (2).
(2)Shareholders funds shall be calculated using standard accounting conventions and
practices by deducting from the assets of the company-
(a) depreciation;
(b) provisions for bad or doubtful debts calculated in accordance with paragraph 4;
(e) provisions for contingent liabilities;
(d) such other provisions as the Tribunal considers reasonable;
(e) all other liabilities of the company.

2. The value of a single share shall be calculated in accordance with the factors and principles
set

out in this Schedule and on the basis of the amount that a willing sole purchaser would at
commencement in the ordinary course of business have paid a willing seller for all of the shares
sold in one block after negotiating at arms length and with full knowledge of the true financial
position and value of the company at commencement divided by the total number of shares.





3. For the purpose of making the calculation under paragraph 2 the Tribunal shall

(a) disregard

(i) the acquisition under the Ordinance;

(ii) the possibility of such acquisition;

(iii) the possibility of any financial support or assistance being made directly or

indirectly by or at the behest of the Hong Kong Government at or after
commencement;

(iv) the possibility of any financial support or assistance being made by another
bank
or financial institution except in the ordinary course of business,

and the effect that such events may have had on the amount to be calculated under
that paragraph;

(b) assume that the purchaser would have

(i) been a corporation with sufficient credit standing so as to be able to attract for

the company inter bank deposits at normal inter bank interest rates and with
sufficient funds at commencement to operate the company properly and
prudentially as a going concern and in particular to reconstruct the company
in accordance with paragraph 6;

(ii) had as full and true knowledge of the financial position of the company at
commencement as it would have had if it had conducted its own thorough audit
and investigation with full co-operation and disclosure by the company and its
management, including, but without derogating from the generality thereof,
knowledge of-

(A)the amount of its liabilities including contingent or deferred liabilities,
capital commitments and contracts for future performance;

(B)the value of its banking assets after making a proper and prudent provision
against bad or doubtful debts calculated in accordance with paragraph 4;

(C)any immediate funding requirements of the company and in particular
whether, and to what extent, short term borrowings or other credit
facilities need be made or refinanced by the company;

(D)the market value of all fixed assets and investments and any adjustments
that might need to be made in the books of account of the company to
state such assets at market value; and

(E)in the light of his knowledge of matters set out in sub-sub-paragraphs (A),
(B), (C) and (D), the amount of shareholders funds including any accounted
for in the form of inner reserves;

(c) assume that all necessary consents to the sale and transfer of the shares would be

given;

(d) except as provided by paragraph 4 have regard only to information that would have

been available at commencement.

4. For the purpose of calculating the level of proper and prudent provision for a bad or doubtful
debt to be made against each debt at commencement the Tribunal shall accept as proper and
prudent the provision made by the directors appointed under section 7 of the Ordinance against
such debt as at 31 March 1984 unless the Tribunal is satisfied, having regard to the information






that would have been available to the purchaser at commencement, that the purchaser would
have made different prudent provision against such debt in which event the Tribunal may
determine the level of such provision.

5. (1) The amount the purchaser would, at commencement in the ordinary course of business,
have paid referred to in paragraph 2 shall be the amount produced by deducting the amount of
Company reconstruction costs (if any) calculated in accordance with paragraph 6 from the value
of the reconstructed company as a going concern, calculated in accordance with paragraph 7.

(2) The amount the purchaser would at commencement in the ordinary course of business
have paid shall be deemed to be nil if the sum calculated in accordance with subparagraph (1) is a
negative amount.

6. (1) Company reconstruction costs means the amount (if any) by which revised shareholders
funds calculated in accordance with subparagraph (2) is less than required shareholders funds
calculated in accordance with subparagraph (3).





(2) Revised shareholders funds shall be calculated by preparing a new balance sheet for the
company as at commencement after making all necessary adjustments and provisions, including

(a) making proper and prudent provision against shareholders funds for bad or doubtful

debts of no less sum than the sum determined in accordance with paragraph
4;

(b) crediting or charging (as the case may be) the shareholders funds by

(i) the amount of any revaluation of assets made under paragraph 3(b)(ii)(D);

(ii) the amount of any adjustment of liabilities of the company made under
paragraph 3(b)(ii)(A).

(3) 'Required shareholders funds' means the amount of shareholders funds that would be
necessary in relation to the assets and liabilities shown in the new balance sheet prepared in
accordance with subparagraph (2) to enable the company to comply with sections 77, 81, 83, 87,
88 and 90 ofthe Banking Ordinance(Cap. 155). (27 of 1986 s.137)

7. (1) The value of the reconstructed company as a going concern shall be ascertained by
multiplying the price earnings ratio at commencement, calculated in accordance with
subparagraph (2), by the earnings of the reconstructed company at commencement, calculated in
accordance with subparagraph (3).

(2) The price earnings ratio shall be calculated by reference to the average of the price
earnings ratios at commencement of such banks quoted on a Stock Exchange in Hong Kong
which, in the opinion of the Tribunal, are of comparable size and character to the company or,
if the Tribunal thinks appropriate, of other banks quoted on a Stock Exchange in Hong Kong,
and by making such adjustments to that average as the Tribunal considers reasonable to take into
account

(a) the fact that the purchaser would gain control of the company;

(b) the prospects for the company after commencement.

(3) The earnings of the reconstructed company at commencement shall be calculated by
taking the average of the earnings of the company published for the 3 consecutive financial
years ending 31 March 1983 reduced by such amount (if any) as the Tribunal considers necessary
to take into account the fact that the performing assets of the reconstructed company may he
less than the performing assets of the company as shown in the earnings of the company
published for those 3 consecutive financial years.

(4) In this paragraph 'performing assets' means an asset on which interest is accrued and
properly taken into profit.

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