Press Release
HAMS proposal lacks governance
Friday, April 26, 2002
In response to media enquiries concerning a proposal presented earlier to the Government on the setting up of "Hongkong Association of Minority Shareholders" (HAMS) with public monies, a Government spokesman said today (April 26) that the proposal was a non-starter.
"The governance of HAMS itself is a major concern. A crucial part of the HAMS proposal is public funding through a statutory levy on all stock exchange transactions," the spokesman said.
Noting that the proposal was discussed by the Standing Committee on Company Law Reform (SCCLR) which has been tasked to review the corporate governance regime in Hong Kong, the spokesman said: "The SCCLR considers that there is a fundamental difficulty in respect of the accountability of the body to be set up as to the use of public monies."
"The structure of HAMS envisages a board of governors elected by members despite the fact that it is to be funded by public monies. In other words, it would be a privately-owned but publicly-funded body which is something of a contradiction. Whilst the levy might be low in percentage terms, the amount that is proposed should be raised and allocated by HAMS is substantial (HK$200 million). There is no effective checks and balance under the proposal," the spokesman explained.
"The Government is firmly committed to enhancing corporate governance standards in Hong Kong," the spokesman stressed.
"In this connection, we are working closely with the SCCLR, the Securities and Futures Commission (SFC), the Hong Kong Exchanges and Clearing Ltd of (HKEx), the relevant professional bodies, for example, the Hong Kong Society of Accountants, the Institute of Directors, the Hong Kong Institute of Company Secretaries," he said.
He added that HAMS was only one of the many proposals to enhance shareholders' rights. Clarifying and strengthening directors' duties and ensuring timely and quality disclosure are equally, if not more, important and a number of proposals in this respect are being implemented and developed by all relevant parties, including those mentioned above.
"In relation to enhancing shareholders' rights, we are pursuing direct and practical measures. These include providing for statutory derivative action and empowering the SFC to bring derivative actions against wrongdoers in relation to a public company including an oversea company listed on the SEHK, for breaches of duty on behalf of the company on specified grounds," he said.
Other measures such as stricter rules against the dilution of shareholders' interests through placing of shares, rights issues and share repurchases are proposed by the Hong Kong Exchanges and Clearing Limited in its recent Consultation Document on changes to the Listing Rules. The SCCLR is also continuing with its review and would put forward further proposals in this regard.
ENDS