Provisional Legislative Council

PLC Paper No. CB(1)1288
(These minutes have been
seen by the Administration)

Ref : CB1/BC/3/97

Bills Committee on
Provident Fund Schemes
Legislation (Amendment) Bill 1997

Minutes of the meeting held on Monday, 16 February 1998, at 8:30 am in the Chamber of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Dr Hon LAW Cheung-kwok (Deputy Chairman)
Hon WONG Siu-yee
Hon LEE Kai-ming
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon Ambrose LAU Hon-chuen, JP
Hon Paul CHENG Ming-fun, JP
Dr Hon TANG Siu-tong, JP
Hon NGAN Kam-chuen

Members absent :

Hon James TIEN Pei-chun, JP
Hon HO Sai-chu, JP
Hon Mrs Peggy LAM, JP
Hon Henry WU
Hon MA Fung-kwok
Dr Hon Mrs TSO WONG Man-yin
Hon YEUNG Yiu-chung
Hon CHOY So-yuk

Public officers attending :

Mrs Pamela TAN
Mandatory Provident Fund Office

Ms Maisie CHENG
Assistant Director
Scheme Operations

Mr Raymond TAM
Assistant Director
Regulatory Standards

Mr Duncan BERRY
Senior Assistant Law Draftsman
Department of Justice

Attendance by invitation :

For item I only

The Hong Kong Society of Accountants (HKSA)

Mr Albert LI
HKSA ' s representative at MPF Specialist Group C"

HKSA ' s Insolvency Practitioners
Committee Member

Mr Alan TANG
HKSA ' s Insolvency Practitioners
Committee Member

Mr Stephen CHAN
HKSA ' s Deputy Director of Professional Standards

HKSA ' s Deputy Director of Professional Practices

Clerk in attendance:

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Mr LEE Yu-sung
Senior Assistant Legal Adviser

Mr Daniel HUI
Senior Assistant Secretary (1)5

I Meeting with the Hong Kong Society of Accountants (HKSA)

(PLC Paper No. CB(1)941(01))

1 Mr Albert LI of HKSA informed members that most of the Association’s concerns on the proposed provisions of the Bill had been addressed by the Administration except proposed section 42A of the Mandatory Provident Fund Schemes Ordinance (MPFSO). The Association was concerned about wordings of the proposed section which stipulated that the auditor or service provider of a MPF scheme could disclose information to the MPF Schemes Authority (MPFA) without contravening any duty of confidentiality if the information given to the Authority was "relevant to the exercise or performance of a function of the Authority". The Association noted that similar provisions in the Banking Ordinance did not contain the expression "exercise or performance of" and was concerned about possible implications of the different wordings of proposed section 42A of the MPFSO on auditors and service providers. The HKSA requested that wordings of proposed section 42A be aligned with those of similar provisions in the Banking Ordinance.

2 At the invitation of the Chairman, the Senior Assistant Law Draftsman (SALD) advised that despite the difference in wordings, the legal effect of proposed section 42A of the MPFSO would be the same as similar provisions in the Banking Ordinance. Nevertheless, he agreed to amend the wordings of the proposed section to address concerns of the HKSA. Admin

3 As regards HKSA’s comments on the draft MPF subsidiary legislation, Mr Peter TISMAN advised that the Association had put forward comments to the Administration on provisions relating to winding up of MPF schemes in Part XIV of the draft MPF Schemes (General) Regulation and was awaiting the Administration’s revised draft. In this regard, the Assistant Director/Scheme Operations (AD/SO) said that Part XIV of the draft Regulation was being revised, taking into account the comments raised by the Bills Committee. The revised draft would be ready very shortly.

4 The Chairman recapitulated that in deliberating on the proposed provisions on winding up of MPF schemes, members of the Bills Committee considered that solvent MPF schemes which had to be wound up voluntarily because of merger or acquisition of the employer concerned should be subject to a set of simplified liquidation procedures. Mr TISMAN advised that the HKSA shared members’ concerns and considered it an improvement if voluntary winding up was limited to cases where the employer concerned was solvent. On provisions relating to winding up of MPF schemes pursuant to a court order, the HKSA suggested that the legislation should contain provisions to enable the court to order payment of the liquidator’s fees in relation to winding up cases where the employer concerned was insolvent. In this regard, SALD advised that existing provisions of the Supreme Court Ordinance already provided guidance to the court in making orders in relation to winding up of companies and the court could invoke these provisions in the liquidation of MPF schemes.

5 The Chairman thanked representatives of the HKSA for attending the meeting and advised the HKSA to forward further comments on the revised drafts to the Administration as soon as possible so that the finalized draft Regulation could be ready for members’ perusal before the Bill received its Second Reading debate on 25 February 1998.

II Meeting with the Administration

(PLC Paper No. CB(1)933(01))

6 Members continued discussion on the Administration’s proposals on the reconstitution of the MPFA from a corporation sole to a body corporate and deliberated on the following proposed sections of the MPFSO.

Proposed section 6AA

7 AD/SO confirmed that in response to members’ concerns raised at past meetings, the Administration had agreed to dispense with the proposed management board and would amend the proposed section to the effect that the MPFA would consist of a body of directors. The post title of Executive Director of the MPFA would be amended to Managing Director and those of "full-time members" and "part-time members" would also be changed to "executive directors" and "non-executive directors" respectively. Admin

8 As regards the proposed membership of the MPFA, the Director/MPF Office (D/MPFO) said that the proposed section would provide for a majority of the directors of the MPFA to be non-executive directors and an equal number of employer representatives and employee representatives. However, in order to maintain flexibility and to ensure that membership would not be unduly large, the provisions would only specify that the MPFA should have not fewer than 10 directors including the chairperson and that the respective number of employer and employee representatives should not be more than two. Admin

9 Miss CHAN Yuen-han considered the Administration’s revised proposals an improvement but she would not accept the proposed provision limiting the number of employee representatives to two. She was concerned that this provision could lead to dilution of employees’ representation on the MPFA if representatives from other sectors was increased in future. She urged the Administration to consider amending the provision to stipulate that at least two of the non-executive directors of the MPFA should be employee representatives.

10 The Deputy Chairman considered that non-executive directors having a simple majority in the MPFA was inadequate. He added that the Hong Kong Association for Democracy & People’s Livelihood would consider amending the provision to the effect that the number of executive directors to non-executive directors would be in the ratio of one to two.

11 Mr WONG Siu-yee stated that he would consider proposing amendments to disallow the appointment of representatives of the retirement scheme industry as non-executive directors of the MPFA so as to avoid conflict of interest. In this regard, D/MPFO cautioned that such an amendment would unduly restrict the Chief Executive’s choices in appointing non-executive directors of the MPFA. She explained that under the Administration’s proposal, the Chief Executive could appoint any person to be non-executive directors of the MPFA having regard to the person’s suitability and knowledge in pension matters.

12 The Chairman reiterated most Committee members’ view that the Managing Director of the MPFA should not be the chairperson of the MPFA. He added that if the Administration would not propose amendments to this effect, the Bills Committee would do so. The Administration agreed to further consider members’ proposal. Admin

Proposed section 6AB(4)

13 AD/SO confirmed that having considered members’ request, the Administration would improve the wordings of the proposed section to stipulate clearly that the Managing Director would, subject to the direction of the MPFA, be responsible for the day to day administration of the affairs of the Authority. Admin

Proposed section 6AB(7)

14 AD/SO advised that as pointed out by members at the last meeting, the proposed section would be deleted because the Chief Executive’s general removal powers had already been provided for in the Interpretation and General Clauses Ordinance (Cap. 1). Admin

Proposed sections 6N and 6Q

15 To address members’ concerns raised at past meetings regarding employers’ and employees’ representation on the MPF Schemes Advisory Board and the Industry Schemes Committee (ISC), AD/SO confirmed that proposed sections 6N and 6Q would be amended to provide for an equal number of representatives of employers and employees on the MPF Schemes Advisory Board and the ISC. Admin

Proposed Schedule 1AA

Proposed Part 2 - section 6

16 The Chairman re-stated his concerns about the absence of a clear definition on "indirect pecuniary interest" in the proposed section and of a time frame for disclosure of pecuniary interest by members of the MPFA. In response, the Administration agreed to amend the proposed section with reference to similar provisions in other ordinances. Admin

Proposed Part 3 - section 7

17 The Senior Assistant Legal Adviser (SALA) pointed out that the expressions "convening of meetings" and "calling of meetings" used in proposed subsections (2) and (3) respectively might carry different meanings. At the request of members, the Administration and SALA would consider suitable amendments to improve clarity. SALA


Proposed Part 3 - section 9

18 At the Chairman’s request, SALA would sort out with the Administration on the desirability of adding in proposed subsection (2) a reference to "an equal number of votes" in connection with the exercise of a casting vote by the presiding member at meetings of the MPFA. SALA

19 In response to the Chairman’s concerns about the practicability of consulting the Financial Secretary before the presiding member could exercise a casting vote, AD/SO advised that similar provisions were found in the Securities and Futures Commission Ordinance and no practical problem had so far been encountered.

Proposed Part 3 - section 11

20 Some members suggested that wordings of the proposed section should be improved to avoid any misunderstanding about the policy intent and operation of the mechanism for transaction of MPFA business by circulation of papers. They considered that, for example, the proposed section was not clear as to whether the MPFA should draw up a list of matters which could be dealt with by circulation of papers. At members’ request, SALA and the Administration would consider whether amendments would be required to improve clarity. SALA


21 The Chairman suggested and members agreed that as a safeguard measure, a proviso should be added to the proposed section to the effect that where the chairperson or any two members of the MPFA requested that a matter should be discussed at a meeting, the circulation mechanism would be superseded. The Administration agreed to amend the proposed section accordingly. Admin

Residual Provident Fund Scheme (RPFS)

22 In response to a member’s enquiry on the proposed Committee stage amendment to section 23 of the MPFSO, AD/SO explained that existing section 23(1) of the MPFSO had to be amended because worded as such, the MPFA would be required to establish a RPFS before implementation of the MPF system, whereas under proposed section 23(1), the MPFA would be given the discretion to establish a RPFS if necessary, i.e. when the no-rejection requirement failed to work effectively.

IIIAny other business

23 Members agreed that the next meeting of the Bills Committee would be held on 23 February 1998.

24 The meeting ended at 10:30 am.

Provisional Legislative Council Secretariat
2 May 1998