Division 5     Financial Assistance for Acquisition of Own Shares
Subdivision 1      Preliminary
274.
Interpretation
(1) In this Division—
financial assistance (資助) means—
(a) financial assistance given by way of gift;
(b) financial assistance given—
(i) by way of guarantee, security or indemnity (other
than an indemnity in respect of the indemnifier’s
own neglect or default); or
(ii) by way of release or waiver;
(c) financial assistance given—
(i) by way of a loan or any other agreement under
which any of the obligations of the person giving
the assistance are to be fulfilled at a time when
in accordance with the agreement any obligation
of another party to the agreement remains
unfulfilled; or
(ii) by way of the novation of, or the assignment of
rights arising under, a loan or other agreement
referred to in subparagraph (i); or
(d) any other financial assistance given by a company if—
(i) the net assets of the company are reduced to a
material extent by the giving of the assistance; or
(ii) the company has no net assets;

 liabilities (負債) includes any amount retained as reasonably
necessary for the purpose of providing for any liability or
loss that is—
(a) likely to be incurred; or
(b) certain to be incurred but uncertain as to the amount
or as to the date on which it will arise;
net assets (淨資產) of a company that gives any financial
assistance under this Division, means the amount by which
the aggregate of the company’s assets exceeds the aggregate
of its liabilities (taking the amount of both assets and
liabilities to be as stated in the company’s accounting
records immediately before the financial assistance is given).
(2) In this Division—
(a) a reference to a person incurring a liability includes
the person changing their financial position by making
an agreement or arrangement (whether enforceable or
unenforceable, and whether made on the person’s own
account or with any other person) or by any other
means; and
(b) a reference to a company giving financial assistance
for the purpose of reducing or discharging a liability
incurred by a person for the purpose of the acquisition
of shares includes the company giving financial
assistance for the purpose of wholly or partly restoring
the person’s financial position to what it was before
the acquisition took place.

Subdivision 2     General Prohibition on Financial Assistance for Acquisition of Own Shares
275.
Prohibition on financial assistance for acquisition of shares or for
reducing or discharging liability for acquisition
(1) If a person is acquiring or proposing to acquire shares in a
company, the company or any of its subsidiaries must not
give financial assistance directly or indirectly for the
purpose of the acquisition before or at the same time as
the acquisition takes place, except as provided by this
Division.
(2) If—
(a) a person has acquired shares in a company; and
(b) any person has incurred a liability for the purpose of
the acquisition,
the company or any of its subsidiaries must not give
financial assistance directly or indirectly for the purpose of
reducing or discharging the liability, except as provided by
this Division.
(3) This section does not apply to the giving of financial
assistance by a company for the purpose of the acquisition
of a share in its holding company or for the purpose
of reducing or discharging a liability incurred for such
an acquisition if the holding company is a company
incorporated outside Hong Kong.
(4) If a company contravenes subsection (1) or (2), the
company, and every responsible person of the company,
commit an offence, and each is liable to a fine of $150,000
and to imprisonment for 12 months.

 276.
Failure to comply with Division does not affect validity of
financial assistance, etc.
If a company gives financial assistance in contravention of this
Division, the validity of the financial assistance and of any
contract or transaction connected with it is not affected only
because of the contravention.
 

Subdivision 3     Exceptions from Prohibition
277.
General exceptions
This Division does not prohibit any of the following
transactions—
(a) the distribution of a company’s assets—
(i) by way of dividend lawfully made; or
(ii) in the course of winding up the company;
(b) the allotment of bonus shares;
(c) the reduction of a company’s share capital in
accordance with Division 3;
(d) the redemption or buy-back of a company’s own
shares in accordance with Division 4;
(e) anything done in accordance with a court order
under Division 2 of Part 13 (arrangements and
compromises);
(f) anything done under an arrangement made under
section 237 of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance (Cap. 32) (power
of liquidator to accept shares, etc., as consideration
for sale of property of company);

 (g) anything done under an arrangement made between
a company and its creditors that is binding on the
creditors because of section 254 of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance
(Cap. 32) (arrangement, when binding on creditors).
278.
Principal purpose exception
This Division does not prohibit a company from giving financial
assistance for the purpose of the acquisition of a share in the
company or its holding company or for the purpose of reducing
or discharging a liability incurred for such an acquisition if—
(a) either—
(i) the company’s principal purpose in giving the
assistance is not to give it for the purpose of the
acquisition of a share in the company or its
holding company or for the purpose of reducing
or discharging a liability incurred for such an
acquisition; or
(ii) the giving of the assistance for the purpose of the
acquisition of a share in the company or its
holding company or for the purpose of reducing
or discharging a liability incurred for such an
acquisition is only an incidental part of some
larger purpose of the company; and
(b) the assistance is given in good faith in the interests of
the company.
279.
Exception for money lending businesses
Subject to section 282, this Division does not prohibit the
lending of money by a company in the ordinary course of
business if the lending of money is part of the ordinary business
of the company.

 280.
Exception for employee share schemes
(1) Subject to section 282, this Division does not prohibit—
(a) the giving by a company, in good faith in the interests
of the company, of financial assistance for the
purposes of an employee share scheme; or
(b) the giving of financial assistance by a company for the
purposes of, or in connection with, anything done by
the company or another company in the same group
of companies for the purposes of enabling or
facilitating transactions in shares in the company or its
holding company between,and involving the
acquisition of beneficial ownership of those shares
by—
(i) persons employed or formerly employed in good
faith by that company or another company in the
same group of companies; or
(ii) spouses, widows, widowers, or minor children of
persons referred to in subparagraph (i).
(2) In this section—
children (子女) includes step-children, illegitimate children and
children adopted in any manner recognized by the law of
Hong Kong;
employee share scheme (僱員參股計劃) means a scheme for
encouraging or facilitating the holding of shares in a
company by or for the benefit of—
(a) persons employed or formerly employed in good faith
by that company or another company in the same
group of companies; or
(b) spouses, widows, widowers, or minor children of
persons referred to in paragraph (a);
minor children (未成年子女) means children who are under 18
years of age.

 281.
Exception for loans to employees
(1) Subject to section 282, this Division does not prohibit the
making by a company of loans to its eligible employees for
the purpose of enabling them to acquire fully paid shares
in the company or its holding company to be held by them
by way of beneficial ownership.
(2) In this section—
child (子女) includes a step-child, an illegitimate child and a
child adopted in any manner recognized by the law of
Hong Kong;
eligible employees (合資格的僱員), in relation to a company,
means persons employed in good faith by the company,
other than—
(a) a director of the company;
(b) a director’s spouse;
(c) a director’s child who is under 18 years of age;
(d) a trustee of a trust (other than an employee share
scheme as defined by section 280(2) or a pension
scheme)—
(i) the beneficiaries of which include a person
referred to in paragraph (a), (b) or (c); or
(ii) the terms of which confer a power on the trustees
that may be exercised for the benefit of a person
referred to in paragraph (a), (b) or (c); or
(e) a partner of a person referred to in paragraph (a), (b)
or (c) or of a trustee referred to in paragraph (d).
282.
Special restriction for listed companies
Section 279, 280 or 281 applies to a listed company only if—
(a) the company has net assets that are not reduced by the
giving of the financial assistance; or

 (b) to the extent that those assets are reduced, the assistance
is provided by a payment out of distributable profits.
 

Subdivision 4     Authorization for Giving Financial Assistance
283.
Financial assistance not exceeding 5% of shareholders funds
(1) A company may give financial assistance for the purpose
of the acquisition of a share in the company or its holding
company or for the purpose of reducing or discharging a
liability incurred for such an acquisition if—
(a) the directors resolve, before the assistance is given,
that—
(i) the company should give the assistance;
(ii) giving the assistance is in the best interests of the
company; and
(iii) the terms and conditions under which the
assistance is to be given are fair and reasonable to
the company;
(b) on the same day that the directors pass the resolution,
the directors who vote in favour of it make a solvency
statement that complies with Division 2 in relation to
the giving of the assistance;
(c) the aggregate amount of the assistance and any other
financial assistance given under this section that has
not been repaid does not exceed 5% of the paid up
share capital and reserves of the company (as disclosed
in the most recent audited financial statements of the
company); and
(d) the assistance is given not more than 12 months after
the day on which the solvency statement is made under
paragraph (b).

 (2) The resolution of the directors under subsection (1)(a)
must set out in full the grounds for their conclusions as to
the matters referred to in subsection (1)(a)(i), (ii) and (iii).
(3) A reference in subsection (1)(c) to any other financial
assistance given under this section that has not been repaid
includes the amount of any financial assistance given in the
form of a guarantee or security for which the company
remains liable at the time the financial assistance in
question is given.
(4) Within 15 days after giving financial assistance under this
section, the company must send to each member of the
company a copy of the solvency statement made under
subsection (1)(b) and a notice containing the following
information—
(a) the class and number of shares in respect of which the
assistance was given;
(b) the consideration paid or payable for those shares;
(c) the name of the person receiving the assistance and, if
a different person, the name of the beneficial owner of
those shares;
(d) the nature, the terms and the amount of the assistance.
(5) If the company contravenes subsection (4), the company,
and every responsible person of the company, commit an
offence, and each is liable to a fine at level 3 and, in the
case of a continuing offence, to a further fine of $300 for
each day during which the offence continues.
284.
Financial assistance with approval of all members
(1) A company may give financial assistance for the purpose
of the acquisition of a share in the company or its holding
company or for the purpose of reducing or discharging a
liability incurred for such an acquisition if—

 (a) the directors resolve, before the assistance is given,
that—
(i) the company should give the assistance;
(ii) giving the assistance is in the best interests of the
company; and
(iii) the terms and conditions under which the
assistance is to be given are fair and reasonable to
the company;
(b) on the same day that the directors pass the resolution,
the directors who vote in favour of it make a solvency
statement that complies with Division 2 in relation to
the giving of the assistance;
(c) the giving of the assistance is approved by written
resolution of all members of the company before the
assistance is given; and
(d) the assistance is given not more than 12 months after
the day on which the solvency statement is made under
paragraph (b).
(2) The resolution of the directors under subsection (1)(a)
must set out in full the grounds for their conclusions as to
the matters referred to in subsection (1)(a)(i), (ii) and (iii).
285.
Financial assistance by ordinary resolution
(1) A company may give financial assistance for the purpose
of the acquisition of a share in the company or its holding
company or for the purpose of reducing or discharging a
liability incurred for such an acquisition if—
(a) the directors resolve, before the assistance is given,
that—
(i) the company should give the assistance;
(ii) giving the assistance is in the best interests of the
company and is of benefit to those members of
the company not receiving the assistance; and

 (iii) the terms and conditions under which the
assistance is to be given are fair and reasonable to
the company and to those members not receiving
the assistance;
(b) on the same day that the directors pass the resolution,
the directors who vote in favour of it make a solvency
statement that complies with Division 2 in relation to
the giving of the assistance;
(c) the company sends to each member of the company a
copy of the solvency statement made under paragraph
(b)and a notice containing the following information—
(i) the nature and terms of the assistance and the
name of the person to whom it will be given;
(ii) if it will be given to a nominee for another
person, the name of that other person;
(iii) the text of the resolution of the directors;
(iv) any further information and explanation that
would be necessary for a reasonable member to
understand the nature of the assistance and the
implications of giving it for the company and the
members;
(d) the giving of the assistance is approved by resolution
of the company before the assistance is given; and
(e) the assistance is given—
(i) not less than 28 days after the day on which the
resolution is passed under paragraph (d); and
(ii) not more than 12 months after the day on which
the solvency statement is made under paragraph
(b).

 (2) The notice and copy of the solvency statement must be
sent to each member under subsection (1)(c) at least 14
days before the day on which the resolution under
subsection (1)(d) is proposed and may accompany notice of
the meeting at which the resolution will be proposed.
(3) Despite subsection (1)(e)(i), if an application is made to the
Court under section 286 in relation to the giving of
financial assistance under this section, the financial
assistance must not be given until the application is finally
determined, unless the Court orders otherwise.
(4) The resolution of the directors under subsection (1)(a)
must set out in full the grounds for their conclusions as to
the matters referred to in subsection (1)(a)(i), (ii) and (iii).
286.
Application to Court for restraining order
(1) Within 28 days after the day on which a resolution for
the giving of financial assistance is passed under section
285(1)(d), an application to the Court for an order
restraining the giving of financial assistance may be
made—
(a) if the company is limited by shares, by members
representing at least 5% of the total voting rights of
holders of shares in the company; or
(b) in any other case, by members representing at least 5%
of the members of the company.
(2) Despite subsection (1), a member who consented to or
voted in favour of the resolution is not entitled to apply.
(3) An application may be made on behalf of the members
entitled to apply by any one or more of them appointed in
writing by all of them.
(4) An application under this section may be made only on the
ground that—
(a) the giving of the assistance is neither—

 (i) in the best interests of the company; nor
(ii) of benefit to those members of the company not
receiving the assistance; or
(b) the terms and conditions under which the assistance is
to be given are not fair and reasonable to—
(i) the company; and
(ii) those members not receiving the assistance.
(5) If an application is made under this section—
(a) the applicant must, as soon as possible, serve the
application on the company; and
(b) the company must give the Registrar notice in the
specified form of the application within 7 days after
the day on which the application is served on the
company.
(6) If the company contravenes subsection (5)(b), the company,
and every responsible person of the company, commit an
offence, and each is liable to a fine at level 3 and, in the
case of a continuing offence, to a further fine of $300 for
each day during which the offence continues.
287.
Power of Court to adjourn application
(1) The Court may adjourn proceedings on an application
under section 286 so that an arrangement may be made to
its satisfaction for the protection of the interests of
dissentient members.
(2) The Court may give any directions and make any orders it
thinks expedient for facilitating or carrying into effect any
such arrangement.

 288.
Power of Court to confirm or restrain giving of financial
assistance
(1) On an application under section 286, the Court must make
an order confirming or restraining the giving of financial
assistance, and may do so on any terms and conditions it
thinks fit.
(2) If the Court confirms the giving of financial assistance, it
may by order alter or extend any date or period of time
specified—
(a) in the directors’ resolution under section 285(1)(a) or
the resolution of the company under section 285(1)(d);
or
(b) in any provision of this Division applying to the giving
of financial assistance.
(3) If the Court thinks fit, the order may—
(a) provide for the company to buy back the shares of any
of its members and for the reduction accordingly of
the company’s share capital;
(b) make any alteration to the company’s articles that may
be required as a consequence;
(c) require the company not to make any, or any specified,
alteration to its articles.
(4) If the order of the Court requires the company not to
make any, or any specified, alteration to its articles, the
company does not have power to make any such alteration
without leave of the Court.
(5) The powers of the Court under this section do not limit its
powers under section 287.

 289.
Company to deliver copy of order of Court to Registrar
(1) Within 15 days after the making of an order by the Court
under section 288, or within any longer period ordered by
the Court, the company must deliver an office copy of the
order to the Registrar for registration.
(2) If the company contravenes subsection (1), the company,
and every responsible person of the company, commit an
offence, and each is liable to a fine at level 3 and, in the
case of a continuing offence, to a further fine of $300 for
each day during which the offence continues.

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