LS/B/19/98-99
2869 9204
2877 5029

6 November 1998

BY FAX
Fax no. : 2868 5279
Total no. of pages : 3

Finance Bureau
Rm 530, 5/F, East Wing
Central Government Offices
Hong Kong

(Attn :

Miss Amy Tse Principal Assistant Secretary for the Treasury (Revenue))

I am scrutinizing the above Bill with a view to advising Members on the legal and drafting aspects. I shall be grateful if you would clarify the following :

1. Clauses 2 & 7 Application to limited companies

Clause 2(b) proposes to amend section 2(1A) of the Business Registration Ordinance (Cap. 310) such that a company incorporated in Hong Kong under the Companies Ordinance (Cap. 32) or to which Part XI of that Ordinance applies shall be deemed to be a person carrying on business notwithstanding any notification of cessation of business furnished under section 8(2). Clause 7 proposes to amend section 7(1) to the effect that the intention to continue carrying on business after the expiry of a valid business registration certificate is irrelevant for such companies.

1. Please clarify whether these two clauses and clause 3 of the Bill intend to give effect to the policies set out in paragraphs 5(d) and (h) of the LegCo Brief.

2. Please explain the reason for the change in policy.

3. Please explain why such companies are still required under section 8(2) to notify the Commissioner of cessation of business in light of the amendments proposed by the Bill.

Please explain the policy intent of the proposed section 5(1B). Would the subsection, as it is so drafted, have the effect of deeming different businesses carried out by an applicant to be branches of one business? Would it also deem a name of a business in languages other than in Chinese and English to be the name of a separate branch of the same business?

3. Clause 6 Registration of business and issue of BR certificate

1. The proposed section 6(4B) does not provide for a notice to be issued by the Commissioner to the person carrying on a business or a branch of a business informing him that such business or branch should not have been registered because it appears to the Commissioner to be unlawful. Would it contravene the rule of natural justice if such notice is not given prior to the removal of entry from the register, or before publication in the Gazette? The proposed section 6(4C) restricts such person to appeal within 28 days of the publication of notice, but makes no provision for the Commissioner to inform the person of his decision.

2. The proposed section 6(4D) is similar to the existing section 6(4A) in that the Commissioner is empowered to request a person to make a new application for registration of a business or branch under a different name for reasons specified in section 6(4)(b) or (c). The distinction is that the power specified in section 6(4A) may be exercised on application prior to registration, while that under the proposed section 6(4D) after registration. There is no restriction in the Bill preventing the Commissioner from exercising his powers under the proposed section 6(4D) even if he has done so under section 6(4A) previously. Is this policy intended?

Is the Administration prepared to take this opportunity to adapt the term "Governor in Council" in section 14(1)?

5. Clause 14 Supply of extract of information in uncertified form

The proposed new section 19A follows the wording of the existing section 19 for the supply of "an extract of any information on the register". Is the information extracted the same, hence certification being the only difference between both sections? Is there any justification for charging the same fees?

According to paragraph 4 of the LegCo Brief, the Administration proposes to set up an Open Business Index to enable the public to search for business registration numbers, and the Index will only include minimal particulars that will enable identification of such businesses. Will the Index be different from the register?

6. Amendments to the Business Registration Regulations

We note that the Bill does not give effect to all policies set out in the LegCo Brief. Please identify which policies will be implemented by way of amendment to the Business Registration Regulations (Cap. 310 sub. leg.) following enactment of the Bill.

I would appreciate it if you could let me have your reply by 11 November 1998 to facilitate me to report on the Bill to the House Committee meeting on 13 November 1998.

Yours sincerely,

(Bernice Wong)
Assistant Legal Adviser

c.c. D of J (Attn. Mr. Frederick Chung, SGC)
(Fax No. : 2869 1302)

Paragraph 1 - Clauses 2 & 7 (Application to limited companies)

1. Clauses 2(b), 2(c) [part] and 7 are intended to give effect to the policies set out in paragraphs 5(d) and (h) of the LegCo Brief. Clause 3 which deems a person as carrying on a branch business under the circumstances described is not primarily targeted at limited companies.

2. There is no change in policy. The policy has all along been to require all companies incorporated or registered under the Companies Ordinance or to which Part XI of the Companies Ordinance applies to pay the business registration fee (and levy) to Government. Section 2(1A) was enacted in 1976 to give effect to this policy. However, doubts have been raised by the court in recent times that where a company gives a notice of cessation of business under section 8(2), the Commissioner of Inland Revenue (the Commissioner) might not be able to issue a renewal demand note to the company under section 7(1)(a)(ii) since the latter section can only be applied where the company "intends to continue carrying on" the business. Therefore, to reflect the policy intention more clearly, clauses 2(b), 2(c) and 7 are proposed.

   It should be noted that a limited company is quite different in its set-up from an unincorporated business. When an unincorporated business ceases, it ceases outright whereas a limited company having ceased its business can still maintain its corporate status and can readily re-commence its business or start a new business at any time thereafter. This difference in capacity explains why in the former case the business registration will be cancelled upon cessation whereas in the latter case the business registration will and should be renewed as usual.

3. When a limited company applies for business registration, its date of commencement of business as well as its nature of business is recorded in the business register as part of the statutory record. Therefore, when its business ceases, its date of cessation should also be reported to the Business Registration Office for record. This reporting requirement is universal for all businesses operating in Hong Kong, whether corporate or unincorporated.

It has been found that some businesses have applied for the registration of more than one business name in respect of the same business, sometimes up to 10 or more. This would undoubtedly complicate the business registration computer system and at the same time make it difficult to conduct business names searches. Proposed section 5(1A) limits a business to apply for registration of one Chinese name, or one English name, or one Chinese name and one English name only. If more names are desired, such additional names will have to be registered as if they are the names of different branches of the business, i.e. branch names [proposed section 5(1B)] for which a separate application for registration under section 5(3) would be required.

Proposed section 5(1B) would not have the effect of deeming different businesses carried out by an applicant to be branches of one business. This section has to be read in conjunction with the proposed section 5(1A) with the effect that all the names in question refer to the business which is the subject of an application for registration under section 5(1).

Basically, only one name in Chinese or English (or one each) can be accepted for registration having regard to the official languages of Hong Kong. Therefore, a name in any other language is not registrable whether as the business name per se or as a branch name. In practice, a business name containing one or several characters in other languages, if such characters are rather commonly used in Hong Kong, will be allowed for registration (e.g. the Japanese character ). Otherwise, the characters would have to be Romanized first.

Paragraph 3 - Clause 6 (Registration of business and issue of BR certificate)

1. Existing section 6(4)(a) provides that the Commissioner shall not be required to register any business/branch where the business/branch is unlawful. However, in the event that such a business/branch has been inadvertently registered, the Commissioner is not presently empowered by the Business Registration Ordinance to take any remedial action. The proposed section 6(4B) remedies the situation by providing that the Commissioner under such circumstances shall remove the entry from the register and publish a notice of the removal in the Gazette. A notice prior to the removal would not serve any useful purpose since the owner of the business/branch will not be able to make the business/branch a lawful one. If, however, the owner is aggrieved by the Commissioner's decision, he could appeal against the decision by lodging an appeal to the Court pursuant to the proposed section 6(4C). Hence, the owner's right to be heard has not been deprived of and the proposed section 6(4B) would not contravene the rules of natural justice. Furthermore, in line with the general practice, the publication of the removal in the Gazette shall be deemed sufficient notice to the business/branch owner concerned.

2. Section 6(4A) refers to the circumstances where the Commissioner has decided not to register any business or branch where the name of the business or branch is undesirable, he shall notify the applicant to register under a different name. However, in the event that such a business/branch name has been inadvertently registered, the Commissioner is presently not empowered to take any remedial action. The proposed section 6(4D) is to provide a remedy in the circumstances.

   It should be noted that the Commissioner's powers under existing section 6(4A) and the proposed section 6(4D) are complementary to each other. Where the Commissioner has previously invoked the power under the former section, the business/branch name concerned would not have been accepted for registration in the first place or the proposed name would have been changed to an acceptable one. Therefore, there is no question of the Commissioner having to exercise the power under the proposed section again.

The term "Governor in Council" in section 14(1) has been dealt with in the Adaptation of Laws (No. 6) Bill 1998 gazetted on 30 October 1998.

Paragraph 5 - Clause 14 (Supply of extract of information in uncertified form)

An extract of information under existing section 19 and that under the proposed section 19A will be exactly the same except for the existence of the certification clause in the former. Under the existing fee charging policy, both types of extracts have to be provided on a full cost recovery basis. At present, the fee for the issue of a certified extract is $45. According to a costing exercise, the cost of providing an uncertified extract would be about $43. However, taking into account the extra costs to be incurred if two separate fee levels are maintained, such as computer programming costs, staff costs in keeping and preparing two sets of accounts and reports, etc., the unit cost of an uncertified extract would come to a full $45. Therefore, the same fees are charged for both.

The Open Business Index will contain only the names, addresses and business registration numbers of all businesses registered under the Business Registration Ordinance. These particulars should be sufficient to identify a required business. Other particulars such as the names of the proprietors or partners, their addresses and identity card numbers, the nature of business, the date of commencement, etc. which are recorded on the register are not shown on the Index.

Paragraph 6 - Amendments to the Business Registration Regulations

The following policies as set out in the LegCo Brief will be implemented by way of amendments to the Business Registration Regulations (in the order of the Brief) -

Paragraph 5(b) -	Payment of business registration fee and levy upfront.
Paragraph 5(e) -	No need to submit a duplicate copy of the application form for business registration.
Paragraph 6(d) -	Removal of businesses that are untraceable or have long-outstanding business registration fees and levy as well as superseded or obsolete information from the register.

Finance Bureau
November 1998