Saving for Solicitors & Bankers Notice to Registrar Power to Appoint Inspector Production of Documents Entry and Search of Premises Provision for Security of Information Penalties for Documents Destruction Penalties for False Information Saving for Solicitors and Bankers Order for Inspection Ancillary Orders Disclosure or Use of Information Legal Professional Privilege Protection of Personal Data Directors of non-Private Companies Directors of Private Companies Liability for Acts of Alternates Written Record of Decision Secretary Restriction on Body Corporate Acting in Dual Capacity Qualification of Director Disposal of Company's Fixed Assets Notices of Resolutions Directors' Duty to Shareholders Provisions as to Bankrupts Validity of Acts of Directors Appointment of Directors Removal of Directors Minimum Age Limit for Directors Resignation of Director or Secretary Prohibition of Loans, etc. Excepted Transactions Consequences of Contravening 157H Criminal Penalties Register of Directors Keeping Register of Directors Duty to Make Disclosure Keeping an Index of Directors Directors with Unlimited Liability Limited Company: Special Resolution Particulars in Accounts Statements Annexed to Accounts Particulars in Accounts of Loans Further Provisions Relating to Loans General Duty to Make Disclosure Disclosure of Material Interests Management Contracts Contracts with Sole Member Payment for Loss of Office Approval of Company Requisite Director's Duty to Disclose Payment Payment of Damages in Certain Cases Supplementary Provisions Provisions as to Assignment of Office Provisions as to Liability of Officers Power to Compromise with Creditors Information as to Compromises Provisions for Reconstruction Successful Take-over Offer Alternative Remedy to Winding up Buy out by Share Repurchase Definition Application Members May Bring or Intervene Service of Written Notice Power to Strike out Proceedings Effect of Approval or Ratification General Powers of Court Protection of Personal Data Power of Court to Make Orders Discontinuance or Settlement Rules of Court Interpretation Disqualification Orders: General Conviction of Indictable Offence Persistent Breaches of Ordinance Disqualification for Fraud, etc. Disqualification of Unfit Directors Applications Under Section 168H Power to Order Public Examination Disqualification After Investigation Matters for Determining Unfitness Fraudulent Trading Criminal Penalties II Offences by Body Corporate Personal Liability for Company's Debts Application for Disqualification Order Application for Leave Under an Order Register of Disqualification Orders Regulations Transitional Modes of Winding up Liability as Contributories of Members Definition of Contributory Nature of Liability of Contributory Contributories in Case of Death Contributories in Case of Bankruptcy Jurisdiction to Wind up Companies Circumstances for Winding up Definition of Inability to Pay Debts Applications for Winding up Appearance of Official Receiver Powers of Court on Hearing Petition Hearing of Unopposed Petition Power to Stay or Restrain Avoidance of Dispositions of Property Avoidance of Attachments, &c. Commencement of Winding up Copy of Order to be Delivered Actions Stayed on Winding-up Order Effect of Winding-up Order Statement of Company's Affairs Report by Official Receiver Power to Appoint Liquidators Appointment of Provisional Liquidator Appointment, Style of Liquidators Person Other than Official Receiver General Provisions as to Liquidators Custody of Company's Property Vesting of Property of Company Powers of Liquidator Exercise of Liquidator's Powers Books to be Kept by Liquidator Payments of Liquidator into Bank Audit of Liquidator's Accounts Control of Official Receiver Release of Liquidators Meetings of Creditors&Contributories Constitution and Proceedings Powers of Court: No Committee Power to Stay Winding up Creditors' Voluntary Winding up Order under Section 209A Transitional II Settlement of List of Contributories Delivery of Property to Liquidator Debts Due by Contributory Power of Court to Make Calls Moneys Due to Company Contributory Conclusive Evidence Appointment of Special Manager Exclusion of Creditors not Proving Adjustment of Contributories Rights Inspection of Books by Creditors Power to Order Costs of Winding up Power to Summon Persons Power to Order Public Examination Jurisdiction of Registrar Power to Arrest Contributory Powers of Court Cumulative Delegation of Powers to Liquidator Dissolution of Company Otherwise Dissolution of Company: Court Order Court May Make a Regulating Order Appointment of Liquidator Compromises and Arrangements Proof of Debts Application of Ordinance Voluntary Winding up Voluntary Winding up Procedure Notice of Resolution to Wind up Commencement of Winding up Effect of Voluntary Winding up Avoidance of Transfers, &c. Certificate of Solvency Provisions Applicable to Winding up Power of Company to Appoint Power to Remove Liquidator Power to Fill Vacancy in Office Liquidator's Power to Accept Shares Duty of Liquidator to Call Creditors' Duty of Liquidator to Call Meeting Final Meeting and Dissolution Annual and Final Meetings Provisions Applicable to Creditors' Meeting of Creditors Appointment of Liquidator Appointment of Committee Fixing of Liquidators' Remuneration Power to Fill Vacancy in Office Application of Section 237 Duty of Liquidator to Call Meetings Final Meeting and Dissolution Provisions Applicable to Every Distribution of Property of Company Powers and Duties of Liquidator Appointing and Removing Liquidator Notice by Liquidator Binding on Creditors Power to Apply to Court Audit of Liquidator's Accounts Costs of Voluntary Winding up Saving for Rights of Creditors Debts of All Descriptions Application of Bankruptcy Rules Interest on Debts Extortionate Credit Transactions Preferential Payments Fraudulent Preference Fraudulently Preferred Persons Fraudulent Preference deemed to Effect of Floating Charge Disclaimer of Onerous Property Restriction of Rights of Creditor Duties of Bailiff as to Goods
Chapter: 32  COMPANIES ORDINANCE

Section Num: 157H  Version Date 13/02/2004

Prohibition of loans, etc., to directors and other persons

(1) The prohibitions in this section are subject to the exceptions in section 157HA.

(2) A company shall not, directly or indirectly-

(a) make a loan to a director of the company or of its holding company;

(b) enter into a guarantee or provide any security in connection with a loan made by any other person to such a director; or

(c) if any one or more of the directors of the company holds (jointly or severally or directly or indirectly) a controlling interest in another company-

(i) make a loan to that other company; or

(ii) enter into a guarantee or provide any security in connection with a loan made by any person to that other company.

(3) A relevant company shall not-

(a) make a quasi-loan to a director of the company or of its holding company;

(b) enter into a guarantee or provide any security in connection with a quasi-loan made by any other person to such a director; or

(c) if any one or more of the directors of the company holds (jointly or severally or directly or indirectly) a controlling interest in another company-

(i) make a quasi-loan to that other company; or

(ii) enter into a guarantee or provide any security in connection with a quasi-loan made by any other person to that other company.

(4) A relevant company shall not-

(a) enter into a credit transaction as creditor for a director of the company or of its holding company;

(b) enter into a guarantee or provide any security in connection with a credit transaction entered into by any other person as creditor for such a director; or

(c) if any one or more of the directors of the company holds (jointly or severally or directly or indirectly) a controlling interest in another company-

(i) enter into a credit transaction as creditor for that other company; or

(ii) enter into a guarantee or provide any security in connection with a credit transaction entered into by any other person as creditor for that other company.

(5) A company shall not arrange for the assignment to it, or the assumption by it, of any rights, obligations or liabilities under a transaction that, if it had been entered into by the company, would have contravened subsection (2), (3) or (4).

(6) If a company enters into an arrangement in contravention of subsection (5), then for the purposes of this section the company is to be treated as having entered into the transaction in question on the date of that arrangement.

(7) A company shall not take part in any arrangement whereby-

(a) another person enters into a transaction or arrangement that, if it had been entered into by the company, would have contravened subsection (2), (3), (4) or (5); and

(b) that other person, in pursuance of the arrangement, has obtained or is to obtain any benefit from the company or its holding company or a subsidiary of the company or its holding company.

(8) In the application of subsections (2), (3) and (4) to-

(a) a company that has any of its shares listed on a recognized stock market; or

(b) a company that is a member of a group of companies of which a company referred to in paragraph (a) is a member, references in that subsection to a director shall include references to-

(i) the spouse or any child or step-child of such director;

(ii) a person acting in his capacity as the trustee (other than as trustee under an employees' share scheme or a pension scheme) of any trust the beneficiaries of which include the director, his spouse or any of his children or step-children or the terms of which confer a power on the trustees that may be exercised for the benefit of the director, his spouse or any of his children or step-children; and

(iii) a person acting in his capacity as partner of that director or of his spouse, child or step-child, or of any trustee referred to in paragraph (ii).

(9) References in subsection (8) to the child or step-child of any person shall include a reference to any illegitimate child of that person, but shall not include a reference to any person who has attained the age of 18 years.

(10) In this section-

"company" means-

(a) a company within the meaning of section 2; or

(b) any other body corporate that is incorporated in Hong Kong under an Ordinance and that has any of its shares listed on a recognized stock market, but does not include an authorized financial institution;

"conditional sale agreement" means an agreement for the sale of goods or land under which-

(a) the purchase price or part of it is payable by instalments;

(b) the property in the goods or land is to remain in the seller until such conditions as to the payment of instalments or otherwise as may be specified in the agreement are fulfilled; and

(c) the buyer is (notwithstanding such reservation of property) to be in possession of the goods or land prior to the fulfilment of such conditions;

"credit transaction" means a transaction between one party ("the creditor") and another party ("the borrower") under which the creditor-

(a) supplies goods to the borrower under a hire-purchase agreement;

(b) sells goods or land to the borrower under a conditional sale agreement;

(c) leases or hires goods or leases land to the borrower in return for periodical payments; or

(d) otherwise disposes of land or supplies goods or services to the borrower on the understanding that payment (whether in a lump sum or instalments or by way of periodical payments or otherwise) is to be deferred;

"director" includes a shadow director;

"guarantee" includes indemnity, and cognate expressions are to be construed accordingly;

"hire-purchase agreement" means an agreement for the bailment of goods under which the bailee may buy the goods, or under which the property in the goods will or may pass to the bailee;

"land" includes any estate or interest in land, buildings, messuages and tenements of any nature or kind whatsoever;

"quasi-loan" means-

(a) a transaction under which one party ("the creditor") agrees to pay, or pays otherwise than in pursuance of an agreement, a sum for another ("the borrower")-

(i) on terms that the borrower (or a person on his behalf) will reimburse the creditor; or

(ii) in circumstances giving rise to a liability on the borrower to reimburse the creditor; or

(b) a transaction under which one party ("the creditor") agrees to reimburse, or reimburses otherwise than in pursuance of an agreement, expenditure incurred by another for another ("the borrower")-

(i) on terms that the borrower (or a person on his behalf) will reimburse the creditor; or

(ii) in circumstances giving rise to a liability on the borrower to reimburse the creditor;

"relevant company" means a company within the meaning of this subsection but does not include a private company other than a relevant private company;

"relevant private company" means a private company that is a member of a group of companies of which a company that has any of its shares listed on a recognized stock market is a member;

"services" means anything other than goods or land.

(11) For the purposes of this section-

(a) a person "makes a quasi-loan to" or "enters into a credit transaction as creditor for" a person if the first-mentioned person is the creditor and the second-mentioned person is the borrower under the quasi-loan or credit transaction, as the case may be;

(b) the liabilities of a borrower under a quasi-loan include the liabilities of any person who has agreed to reimburse the creditor on behalf of the borrower; and

(c) a body corporate is not to be treated as a shadow director of any of its subsidiaries by reason only that the directors or a majority of the directors of the subsidiary are accustomed to act in accordance with its directions or instructions.

(Replaced 28 of 2003 s. 62)

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