Provisional Legislative Council

PLC Paper No. CB(1)709
(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, 8 December 1997, at 2:30 pm in Conference Room A 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 Mrs Peggy LAM, JP
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Dr Hon TANG Siu-tong, JP
Hon NGAN Kam-chuen

Members absent :

Hon James TIEN Pei-chun, JP
Hon HO Sai-chu, JP
Hon Henry WU
Hon MA Fung-kwok
Dr Hon Mrs TSO WONG Man-yin
Hon YEUNG Yiu-chung
Hon Ambrose LAU Hon-chuen, JP
Hon Paul CHENG Ming-fun, JP
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 Geoffrey FOX
Senior Assistant Law Draftsman
Department of Justice

Clerk in attendance:

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Mr LEE Yu-sung
Senior Assistant Legal Adviser

Miss Anita HO
Assistant Legal Adviser 2

Mr Daniel HUI
Senior Assistant Secretary (1)5

I Meeting with the Administration

Members continued the scrutiny of proposed amendments to the Mandatory Provident Fund Schemes Ordinance (MPFSO).

Proposed Schedule 8

2. Members noted that proposed Schedule 8 specified the conditions under which a person or a company would be treated as an associate of approved trustees and other service providers for the purposes of the MPFSO.

3. In reply to a member, the Assistant Director/Regulatory Standards (AD/RS) confirmed that employees of an approved trustee would be allowed to participate in MPF schemes operated by the approved trustee.

The Administration’s response to issues raised by members at the meeting held on 1 December 1997
(PLC Paper No. CB(1)630(01))

Proposed amendments to section 2

4. On the proposed deletion of the definition of "statutory corporation", AD/RS explained that the definition had become redundant as the proposed definition of "approved trustee" would exclude statutory corporations from becoming approved trustees. In this connection, members noted that the expression "statutory corporation" appeared only in the preamble, section 2 and section 20(3) of the MPFSO and the expression had been underlined in the extracts attached to Annex A of the Administration’s information paper for their easy reference.

5. As regards the definition of "chief executive", members noted that the Administration agreed to move a Committee stage amendment (CSA) to change the expression "chief executive" to "chief executive officer" when referring to senior management of a company, in order to avoid confusion with the Chief Executive of Hong Kong Special Administrative Region.Admin.

6. In reply to a member’s earlier enquiry on the major difference between the existing and proposed definitions of "master trust scheme", the Senior Assistant Legal Adviser (SALA) advised that the proposed definition was a technical amendment to the existing definition to take into account the future establishment of industry schemes.

Proposed section 6(1)

7. On the re-constitution of the MPFA, notably whether a board of directors should be provided for, members understood that the Administration was examining the issue and would report back to the Committee at a later meeting.Admin.

8. In this connection, the Senior Assistant Legal Adviser (SALA) advised that as could be seen from extracts of other pieces of legislation circulated to members, the Securities and Futures Commission, the Employees Retraining Board and the Estate Agents Authority had management boards comprising representatives from relevant sectors of the community.

Proposed section 6A

9. As regards expanding the function of the future MPFA to include overseeing schemes registered under the Occupational Retirement Schemes Ordinance (ORSO), the Administration accepted members’ suggestion and would prepare CSAs to give effect to this proposal.Admin.

Proposed section 6D

10. Responding to members’ concern about the binding effect of the guidelines issued by the MPFA, the Administration clarified that it was quite common for legislation to provide for the issuance of guidelines which were not legally binding but which might be admissible as evidence in court. Relevant examples in other pieces of legislation were shown in Annex B of the Administration’s information paper. Members noted that there was no essential difference in terms of relevant wordings in the examples cited and proposed section 6D(5).

Proposed section 6F

11. Responding to members’ suggestion against limiting the MPFA’s obligation to prepare a corporate plan for its next financial year only and not for a longer period, the Administration would move a CSA to stipulate that the MPFA might prepare a corporate plan covering more than one year, if necessary.Admin.

Proposed section 6L

12. Having considered members’ views raised earlier on, the Administration would move a CSA to require the MPFA to submit financial statements within six months after the end of a financial year, or such longer period as the Financial Secretary might allow. Admin.

Proposed section 6P

13. At members’ request, the Administration would move a CSA to stipulate the quorum for a meeting of the MPF Schemes Advisory Board to be half of the total number of members.Admin.

The Administration’s response to major issues raised by members at the meeting held on 3 December 1997
(PLC Paper No. CB(1)630(02))

14. On the re-constitution of the MPFA, Miss CHAN Yuen-han considered that in order to ensure a prominent management role by the Government in the future MPFA, proposed section 6(3) should be amended to the effect that the Chief Executive may appoint a public officer (instead of "a person") to be the Executive Director of the MPFA.

15. In response, the Director/MPF Office (D/MPFO) advised that the proposed provisions in section 6(3) would provide flexibility to the Chief Executive in appointing a public officer other than the Financial Secretary, or a person not being a public officer to be the Executive Director of the MPFA. She said that the MPFO would have to seek legal advice on the implications of the proposed exclusion of " any other person" from the subsection.Admin.

16. In reply to the Chairman, the Administration would examine the following suggestions raised by some members:Admin.

  1. the MPFA would be a statutory corporation;

  2. a public officer would be appointed as Executive Director of the MPFA; and

  3. a management board would be established to provide checks and balance on the powers of the MPFA.

17. As regards a member’s concern about the insufficient involvement of the Government in industry schemes as provided under the proposed provisions in sections 6Q to 6S, D/MPFO reiterated that the Administration had no intention to withdraw its role and remained committed to overseeing the effective implementation of industry schemes. The Chairman opined that the role of the Industry Schemes Committee was related to the proposed re-constitution of the MPFA and suggested that the issue be reconsidered in the context of the Administration’s response to the proposed re-constitution of the MPFA. Members agreed.

Proposed section 22B(3)

18. Members noted that the Administration would move a CSA to delete the last part of section 22B(3) which required the MPFA not to take into account the fund appropriated by the LegCo to the MPFA when setting the level of the annual registration fee. Admin.

The Administration’s response to major issues raised by members at the meeting on 4 December 1997
(PLC Paper No. CB(1)630(03))

19. On the MPFA’s obligation or otherwise to disclose information to the Commissioner of Inland Revenue (CIR), members noted the Administration’s clarifications as set out in the information paper, in particular the fact that the CIR was exempted from the Personal Data (Privacy) Ordinance and, with the powers vested in him under the Inland Revenue Ordinance, the CIR could gain access to the information of scheme members directly through trustees when necessary.

Proposed sections 43B and 43C

20. The Administration would move CSAs to make it an offence for an employer or self-employed person who did not pay mandatory contributions.Admin.

Proposed section 45(2)

21. The Administration would move a CSA to substitute reference to "subsection 3(a)" by "section 45A(1)(a)".Admin.

Proposed section 45A(3)

22. The Administration would move a CSA to delete proposed section 45A(3) in order to empower the Administration to prescribe provisions under regulation so that failure to comply with which could be subject to financial penalty or punishable as an offence. Admin.

Proposed Schedule 3 (Chinese version)

23. The Administration would move a CSA to add the character " " before "$240,000" in proposed Schedule 3 (Chinese version). Admin.

Proposed deletion of section 23

24. On the proposed deletion of section 23 on the Residual Provident Fund Scheme (RPFS), Miss CHAN Yuen-han reiterated the Democratic Alliance for Betterment of Hong Kong’s objection and indicated that she might move CSAs to retain the RPFS if the Administration would not change its stance. Miss CHAN added that the investment fund industry had indicated to her about the difficulties in providing capital preservation products under the MPF system and this development was a clear indication of genuine cases of small employers or self-employed persons being unable to join a regular MPF Scheme in future. She therefore urged the Administration to retain the RPFS as a last safety net for persons with genuine difficulties in joining a MPF scheme in the market.

25. The Deputy Chairman stated that the Hong Kong Association for Democracy and People’s Livelihood was against the proposed abolition of the RPFS and urged the Administration to reconsider its position on the issue.

26. In response to the Chairman, D/MPFO agreed to further study whether it was feasible to provide for a form of RPFS arrangement to complement the statutory "no-rejection" requirement so as to cater for persons who were genuinely unable to join a MPF Scheme in the market to fulfil their obligations under the Ordinance. Admin.

27. The Chairman proposed that pending the Administration’s proposals on the re-constitution of the MPFA and the RPFS, the Committee should proceed to examine proposed amendments to the MPFSO clause by clause. Members agreed.

Clause-by-clause examination of proposed amendments to the MPFSO

28. Members went through the amendments and deliberated on the following proposed provisions.

Proposed section 1(2)

29. A member queried the basis for providing different commencement dates for different provisions of the Ordinance. In reply, the Senior Assistant Law Draftsman (SALD) explained that proposed section 1(2) was meant to cater for possible contingency and was a typical commencement clause for complicated legislation such as the MPFSO.

Proposed section 2

30. On the proposed definition of "close relative", the Administration advised that the policy intent was to adopt a wide definition on "close relative" because persons who were close relatives of a director of an approved corporate trustee could not be appointed as an independent director of the approved trustee for the purpose of the Ordinance in order to avoid the conflict of interests.

31. In reply to the Chairman, SALD advised that the proposed definition of "spouse" sought to cover genuine de-facto relationship of man and wife. SALD agreed to check whether similar definitions existed in other pieces of legislation. Admin.

Proposed section 5

32. The Chairman expressed concern about the legal obligations of an employer under the MPFSO if the MPFA, by virtue of its power under proposed section 5(5)(c), revoked the exemption of an ORSO registered scheme provided by the employer. In response, AD/RS explained that in revoking an exemption of an ORSO scheme, prior notification would be given to the employer to allow him time to arrange MPF coverage for the employees.

Proposed sections 6 to 6S

33. Members would consider the proposed sections when the Administration’s proposals on re-constitution of the MPFA were available.Admin.

Proposed section 11

34. In reply to members’ enquiry on voluntary contributions, the Assistant Director/Scheme Operations (AD/SO) advised as follows:

  1. in accordance with subsection (8) voluntary contributions would be exempted from statutory requirements on vesting, portability preservation and withdrawal;

  2. a scheme member would be allowed to withdraw his voluntary contributions upon change of employment in accordance with the relevant scheme rules; and

  3. subject to the relevant scheme rules, the amount of voluntary contribution could normally be changed provided that prior notification was given to the trustee by the employee or employer concerned.

Proposed section 14(2)

35. Members noted that the Administration would move a CSA to specify that the transfer of accrued benefits under section 14(2)(a) or (b) had to be in accordance with the circumstances prescribed by the regulation.Admin.

Proposed section 16

36. Members noted that proposed amendments to section 16 would provide that only those accrued benefits of a scheme member that were derived from mandatory contributions would be protected from execution of a judgement debt, a charge or other disposition. In this connection, SALD advised that the primary purpose of the proposed amendment was to prevent a person from evading his financial obligations by making substantial voluntary contributions to a MPF Scheme.

Proposed deletion of section 23

37. Members would further consider the proposed deletion pending the Administration’s response to members’ comments on the RPFS. Admin.

II Any other business

38. The Chairman reminded members that the next meeting of the Bills Committee would be held on 11 December 1997 at 2:30 pm.

39. The meeting ended at 4:30 pm.

Provisional Legislative Council Secretariat
29 December 1997